U.S. Baseline Briefing Book - FAPRI-MU · FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 1 Summary Lower prices have resulted in a large decline in crop producer

U.S. Baseline Briefing Book Projections for Agricultural and Biofuel Markets

March 2015

FAPRI‐MU Report #01‐15

Prepared by the Integrated Policy Group, Division of Applied Social Sciences

www.fapri.missouri.edu

amap.missouri.edu

Agricultural Markets and Policy

Published by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri

(MU), 101 Park DeVille Drive, Suite E; Columbia, MO 65203. FAPRI–MU is part of the Division of

Applied Social Sciences (DASS) in the College of Agriculture, Food and Natural Resources (CAFNR).

www.fapri.missouri.edu

This material is based upon work supported by the U.S. Department of Agriculture, under Agreement Nos.

58‐0111‐13‐002 and 58‐0111‐14‐001.

Any opinion, findings, conclusions, or recommendations expressed in this publication are those of the

authors and do not necessarily reflect the view of the U.S. Department of Agriculture nor the University of

Missouri.

The crop, biofuel, government cost and farm income projections in this report were prepared by the

team at FAPRI‐MU, including Pat Westhoff ([email protected]), Scott Gerlt

([email protected]), Jarrett Whistance ([email protected]), Julian Binfield

([email protected]), Wyatt Thompson ([email protected]), Sera Chiuchiarelli

([email protected]) and Deepayan Debnath ([email protected]).

The livestock, poultry, dairy and consumer price projections were prepared by the MU Agricultural

Markets and Policy (AMAP) team, including Scott Brown ([email protected]) and Daniel

Madison ([email protected]).

FAPRI‐MU and AMAP are both part of the Integrated Policy Group in the MU Division of Applied

Social Sciences.

U.S. crop trade figures reported here were prepared with the help of Mike Helmar

([email protected]) at the University of Nevada, Reno, Eric Wailes ([email protected]) and

Eddie C. Chavez ([email protected]) at the University of Arkansas and Darren Hudson

([email protected]) at Texas Tech University.

The Agricultural and Food Policy Center at Texas A&M University will prepare a companion set of

estimates of the farm‐level impacts of these projections (www.afpc.tamu.edu).

The authors would like to thank participants in a workshop reviewing a preliminary version of these

estimates in Washington in December 2014. Any remaining errors are those of the authors.

Permission is granted to reproduce this information with appropriate attribution to the authors and

FAPRI–MU.

The University of Missouri does not discriminate on the basis of race, color, religion, national origin, sex, sexual

orientation, gender identity, age, genetics information, disability or status as a protected veteran. For more

information, call Human Resource Services at 573‐882‐4256 or the US Department of Education, Office of Civil Rights.

Table of contents Summary ...................................................................................................................................... 1

Crop production, prices and farm income .................................................................................... 3

New farm bill provisions and effects ............................................................................................. 4

Livestock and dairy outlook highlights ......................................................................................... 5

Other highlights: Biofuels, exports and food prices ...................................................................... 6

Policy assumptions under the new farm bill ................................................................................. 7

Crop program participation under the new farm bill ..................................................................... 9

Macroeconomic assumptions and farm prices paid .................................................................... 11

Corn ........................................................................................................................................... 13

Soybeans .................................................................................................................................. 15

Wheat ........................................................................................................................................ 17

Upland cotton ............................................................................................................................. 19

Sorghum and barley ................................................................................................................... 21

Oats and hay ............................................................................................................................. 23

Rice and sugar ........................................................................................................................... 25

Peanuts and sunflower seed ...................................................................................................... 27

Land use .................................................................................................................................... 29

Soybean products ...................................................................................................................... 31

Corn products ........................................................................................................................... 33

Ethanol and biofuel policies ...................................................................................................... 35

Biomass-based diesel and biofuel plant returns ....................................................................... 37

Cattle and hogs ......................................................................................................................... 39

Meat .......................................................................................................................................... 41

Dairy .......................................................................................................................................... 43

Food prices and expenditures ................................................................................................... 45

Government costs ..................................................................................................................... 47

Payments and crop insurance .................................................................................................. 49

Farm receipts and expenses ..................................................................................................... 51

Farm income ............................................................................................................................. 53

Ranges from the 500 alternative futures ................................................................................... 55

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 1

SummaryLower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.

These baseline projections for agricultural and biofuel markets were prepared using market information available in January 2015. Macroeconomic assumptions are based on forecasts by IHS Global Insight which suggest moderate growth in the U.S. and global economies. After declining sharply in late 2014, forecasted oil prices increase steadily.

The baseline incorporates the Agricultural Act of 2014 (the new farm bill). The analysis requires important assumptions about how people will respond to new program options. As more information becomes available, these assumptions and estimates will need to be revisited.

The figures reported here represent the average of 500 alternative outcomes based on different assumptions about the weather, oil prices and other factors. In some of the 500 outcomes, prices, quantities and values are much higher or much lower than the reported averages.

Some key results:

• Record production of corn and soybeans in 2014 has pushed down prices of all major grains and oilseeds.

• In response to lower expected prices, U.S. producers are projected to reduce corn, wheat and cotton acreage in 2015, while slightly increasing soybean area. The total area devoted to major crops declines in 2015, but remains above the average that prevailed over the 2008-13 life of the previous farm bill.

• Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies.

• Between 2016/17 and 2024/25, corn prices average $4.06 per bushel and soybeans $10.09 per bushel, similar to projections made last year. Wheat prices average $5.57 per bushel, and cotton prices average 63 cents per pound.

• Milk, hog and poultry prices are all projected to decline in 2015 as producers respond to lower feed costs and the record output prices of 2014 by significantly increasing production. Cattle and beef supplies remain tight in 2015, but prices begin to fall in 2016 as beef production starts to expand again.

• Lower prices translate into reduced farm income, as both crop and livestock cash receipts decline in 2015. Lower feed and fuel costs result in a modest reduction in total farm production expenses. Net farm income falls to $79 billion, a 27 percent decline from 2014.

• Payments under 2014 farm bill programs increase when crop prices fall. A projected $3.9 billion in Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments for the 2014 crop will be made after fiscal year (FY) 2016 begins on October 1, 2015.

• Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion, but decline to $3.4 billion for the 2018 crop. Actual ARC and PLC spending in any given year is likely to differ greatly from these projected averages, given price and yield volatility.

• Crop insurance net outlays are projected to average more than $8 billion per year over the next ten years.

• Projected food price inflation drops to 1.6 percent in 2015, and averages 2 percent per year from 2016-2024.


Key results

2008/09 2013/14 2016/17 2024/25Marketing year average 2014/15 2015/16 average

Crop pricesCorn farm price, dollars per bushel 5.06 3.63 3.89 4.06Soybean farm price, dollars per bushel 11.79 10.02 9.29 10.09Wheat farm price, dollars per bushel 6.54 6.13 5.17 5.57Upland cotton farm price, cents per pound 71.8 61.8 60.0 63.1

Crop area planted, million acresCorn 90.9 90.6 87.9 90.9Soybeans 76.6 83.7 84.2 83.4Wheat 56.8 56.8 55.1 54.8Upland cotton 11.0 10.8 9.5 9.512 major crops* 256.6 262.7 258.3 260.0

2008 2013 2016 2024Calendar year except as noted average 2014 2015 average

Livestock sector pricesFed steers, 5 area direct, dollars per cwt 105.81 154.56 156.07 129.23Barrows and gilts, 51 52% lean, dollars per cwt 55.86 76.03 62.11 56.07National wholesale broiler, cents per pound 84.32 104.87 94.53 95.55All milk, dollars per cwt 17.78 23.97 17.59 18.68

Biofuel production, billion gallonsEthanol 12.4 14.3 14.2 15.2Corn starch based ethanol 12.1 14.2 14.0 14.9

Biomass based diesel 0.9 1.6 1.3 1.8

Government outlays, billion dollars, fiscal yearCommodity Credit Corporation net outlays 9.4 12.2 7.7 8.0Major commodity programs 5.9 5.1 1.6 5.0CRP, disaster and all other CCC net outlays 3.5 7.1 6.0 3.0

Crop insurance net outlays 7.0 8.3 7.0 8.6

Net farm income, billion dollars 92.7 108.0 79.3 71.9

Annual consumer food price inflation 2.6% 2.4% 1.6% 2.0%

*Includes corn, soybeans, wheat, upland cotton, sorghum, barley, oats, rice, peanuts, sunflowers, sugarcane and sugarbeets.

Note: The estimates are based on market information available in January 2015 and incorporate provisions of theAgricultural Act of 2014, the new farm bill. Projections are averages across 500 outcomes.

U.S. producers harvested record corn and soybean crops in 2014.

Both crops saw record yields, and soybean area was also at an all-time high.

World production of both crops also increased in 2014, breaking records set in 2013.

These large crops are the primary reason grain and oilseed prices have declined sharply from records set during the 2012/13 marketing year.

Corn prices declined from $6.89 per bushel in 2012/13 to about half that level at harvest time last fall.

If yields return to more normal levels in 2015, corn prices may recover, but average projected prices remain below $4.00 per bushel until 2017/18.

Soybean and wheat prices have also declined since 2012/13, and both could drop again in 2015/16 in the face of continued large global supplies.

Nominal net farm income reached record highs in 2013. Net farm income declined in 2014 because of lower crop prices.

In 2015, lower prices lead to a projected decline in both crop and livestock receipts.

Even though lower feed and fuel costs reduce production expenses, the sharp drop in receipts results in a 27 percent decline in net farm income in 2015.

Net farm income declines further from 2016-2018, to levels not seen since 2009.

Crop production, prices and farm income


2014 corn and soybean crops set records

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U.S. corn yield

U.S. corn production

World corn production

U.S. soybean yield

U.S. soybean production

World soybean production

Percent increase from previous record

Large crops result in lower prices

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Net farm income declines from 2013 record

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The baseline incorporates provisions of the Agricultural Act of 2014, the new farm bill.

For crop producers, this includes the elimination of direct and countercyclical (DCP) payments and the average crop revenue election (ACRE) program.

It also includes the creation of two new options, price loss coverage (PLC) and agriculture risk coverage (ARC), as well as new crop insurance policies and more.

The new PLC and ARC programs cost little when crop prices and revenues are high, but could make large payments when prices or revenues are low.

Given all of the assumptions of the baseline, average PLC and ARC payments for the 2014-2018 crops are just under $5 billion per year.

ARC spending is greatest in 2015/16 but declines in later years as the moving averages that determine benchmark revenues adjust.

Crop insurance net outlays peaked in FY 2013 because of 2012 drought losses. Projected crop insurance costs average $8 billion per year from FY 2015-FY 2020.

Net Commodity Credit Corporation (CCC) outlays (covering commodity and disaster programs, the conservation reserve and more) reached $12 billion in FY 2014.

Projected net CCC outlays exceed $10 billion again in FY 2017, when ARC and PLC payments associated with the 2015 crop will be made.

New farm bill provisions and effects


Baseline incorporates 2014 farm bill provisions

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08/09 10/11 12/13 14/15 16/17 18/19

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Corn target/reference Corn loan Corn direct payment

New crop payments replace DCP and ACRE

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Crop insurance costs can exceed other programs

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CCC net outlays Crop insurance net outlays

The combination of tight supply and strong domestic meat demand resulted in record prices for many livestock products in 2014.

The record output prices coincided with sharply lower feed costs, allowing for record high profitability for many producers in 2014.

Recent profitability levels follow what was a very difficult set of years financially for many producers for all or most of 2008-2013.

Record levels of profitability will result in more meat production in coming years.

Pork and poultry production will increase in 2015 and 2016, as larger breeding herds and improved productivity combine for sharp increases in output.

It will take longer for beef production to increase due to the time required to raise a new animal to market weight once a decision has been made to expand output.

International dairy product prices decreased for most of 2014, as demand weakened and milk supplies recovered in many exporting nations.

U.S. product prices remained well above international levels for much of 2014, allowing for a record high all milk price near $24 per hundredweight.

U.S. prices have begun to decline in recent months, as markets catch up to the international supply and demand situation and domestic milk supplies increase.

Livestock and dairy outlook highlights

Weak international dairy markets affect milk price

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2002 2004 2006 2008 2010 2012 2014 2016

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Record high prices for cattle and hogs in 2014

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Meat production will grow, but at varying rates

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Exports account for a much larger share of production for cotton, soybeans, wheat and rice than for corn, beef, pork or chicken.

Continued growth is expected in the share of beef, pork and chicken which is exported.

For corn and soybeans, the share exported would be larger if one considered exports of feeds, biofuels, vegetable oils, and other products derived from corn and soybeans.

Meat price inflation was much greater in 2014 than inflation for other food items.

CPIs for beef (up 12.1 percent), pork (9.1) and eggs (8.4) far outpaced price increases for fruits and vegetables (1.5), cereal and bakery items (0.2) and sugar and sweets (-0.8).

Although beef prices increase more than other food prices in 2015, the difference is much smaller than in 2014.

Other highlights: Biofuels, exports and food prices


Share of production exported varies

0%10%20%30%40%50%60%70%80%

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Ethanol production dips slightly in 2015 due to tighter margins but resumes a path of modest growth in the years that follow.

In the near term, lower oil prices result in an increase in motor fuel use, so more ethanol can be used in 10 percent blends.

U.S. exports (right axis) are projected to grow steadily as U.S. ethanol prices remain competitive globally.

Results are sensitive to assumptions about implementation of the Renewable Fuel Standard (RFS).

Ethanol production and use grow slowly

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Meat prices outpace other inflation one more year

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ARC is the other new option for grain and oilseed producers. Payments occur when county or farm-level revenues per acre fall below 86 percent of a benchmark.

The benchmark depends on moving five-year Olympic averages of national prices and county or farm yields.

To illustrate, consider a county where corn yields match the national average. At our average projected prices, the 2014-2016 crops would earn ARC payments, but the 2017 and 2018 crops would not.

The 2014 farm bill reauthorizes and consolidates conservation programs.

The Conservation Reserve Program is operated by the Farm Service Agency and funded by the CCC.

The Environmental Quality Incentives Program and the Conservation Stewardship Program are operated by the Natural Resources Conservation Service.

Total projected spending on these programs is around $5 billion per year.

Policy assumptions under the new farm billReference prices exceed old target prices

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The 2014 farm bill eliminates the DCP and ACRE programs and creates several new programs.

PLC is one new option for grain and oilseed producers. Participating producers receive a payment when national season-average farm prices fall below fixed reference prices.

The new reference prices are higher than the target prices that were used in calculating countercyclical payments under the previous farm bill.


ARC benchmarks depend on moving averages

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Conservation programs total $5 billion per year

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Selected policy assumptions, 2014 2024

Policy Description

Direct, countercyclical and Not available for 2014 and subsequent crop yearsACRE payments

Price loss coverage Makes payments when marketing year average price falls below fixed reference prices:(PLC) Corn $3.70/bu.

Soybeans $8.40/bu.Wheat $5.50/bu.Rice $14.00/cwt ($16.10/cwt for Japonica)Sorghum $3.95/bu.Barley $4.95/bu.Oats $2.40/bu.Peanuts $535/tonSunflowers 20.15 cents/lb.Cotton not available

Paid on 85% of base acreage and program yields

Agriculture Risk Coverage Makes payments when county or farm per acre revenues fall below 86% of a benchmark(ARC) County option benchmark: 5 year Olympic average price multiplied by 5 year Olympic average yield

Farm option benchmark: 5 year Olympic average of weighted farm revenue per acreMaximum payment is 10% of benchmark valuePaid on 85% (county option) or 65% (farm option) of base acreageAlternative to price loss coverageAvailable for program crops (not upland cotton)

Sequestration Assumed to apply to PLC andARC payments and certain conservation paymentsRate: 7.0% for 2015 crop payments, declining to 5.8% for 2018 24 crop payments

Marketing loan program Continues 2008 farm bill provisions for crops other than upland cotton

Supplemental coverage option Available for program crops not enrolled in ARC beginning in 2015Area crop insurance available as a supplement to conventional insuranceCovers range between 86% and individual coverage level65% of premium subsidized

Upland cotton Stacked income protection program (STAX)Area crop insurance availabe in addition to conventional insurance80% of premium subsidized

Transition payment in 2014 (STAX not available until 2015)Loan rate varies in range dependng on recent world cotton pricesNo cotton PLC or ARC programsFormer cotton base (now generic base ) eligible for PLC or ARC if planted to other crops

Sugar Continues 2008 farm bill provisionsIncorporates stylized version of agreement with Mexico

Conservation reserve Caps conservation reserve acreage at 24 million acres by 2017

Dairy Margin insurance program establishedMILC no longer availableDairy product price support program not available for 2014 and subsequent years

For soybeans, expected average ARC payments exceed PLC payments for all five years of the 2014 farm bill.

Producers would also need to consider possible SCO benefits, which are only available to PLC participants.

Producers can enroll in the county-based ARC program, which pays on 85 percent of base area, or in the farm-based ARC, which considers all program crops on a farm and pays on 65 percent of base area.

Price expectations, yield histories and risk attitudes will affect producer enrollment choices.

Based in part on projected average payments, the baseline assumes most producers of wheat, sorghum, rice and peanuts will enroll in PLC.

Most soybean and corn producers are assumed to elect ARC. Of those enrolled in ARC, 90 percent are assumed to choose the county-based option.

Crop program participation under the new farm billPaths differ for projected average corn payments

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Under the new farm bill, producers must make a one-time choice to participate in ARC or PLC for the 2014-2018 crops.

Projected national average ARC payments for corn producers exceed PLC payments for the first three years, but the opposite is true for the last two.

Expected payments may be very different in different counties. For example, high 2014 yields may mean no 2014 crop ARC payments for corn in some counties.

Greater PLC enrollment assumed for most crops

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PLC County ARC Farm ARC


Expected ARC payments exceed PLC for soybeans

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PLC County Farm

Corn 40.0% 54.0% 6.0%

Soybeans 30.0% 63.0% 7.0%

Wheat 60.0% 36.0% 4.0%

Upland cotton n.a. n.a. n.a.

Sorghum 80.0% 18.0% 2.0%

Barley 75.0% 22.5% 2.5%

Oats 50.0% 45.0% 5.0%

Rice 90.0% 9.0% 1.0%

Peanuts 95.0% 4.5% 0.5%

ARC and PLC participation(share of base acres)

ARC PLC

Corn $26.83 $19.92

Soybeans $16.91 $9.57

Wheat $11.16 $13.66

Upland cotton n.a. n.a.

Sorghum $11.00 $20.82

Barley $10.09 $21.70

Oats $1.96 $1.38

Rice $4.19 $66.02

Peanuts $44.91 $138.38

Payments per participatingacre, 2014 2018 average

Oil prices declined sharply in the final months of 2014.

IHS Global Insight forecasts that oil prices will recover, exceeding $140 per barrel by 2024.

Futures markets in early March 2015 suggested a much smaller increase.

Our stochastic simulations (see the end of this report) examine a range of energy prices around the IHS Global Insight figures.

Lower feed and fuel prices reduce farm production expenses in 2015.

Fertilizer prices are also expected to decline in 2015, offsetting cost increases for some other inputs.

Projected increases in fuel prices and general inflation in the economy contribute to an increase in overall farm input prices after 2017.

Macroeconomic assumptions and farm prices paidFaster U.S. growth and low inflation expected in 2015

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Real GDP growth 3-mo. Treasury bill CPI inflation

IHS Global Insight forecasted in January that U.S. real GDP growth would accelerate in 2015 to 3.1 percent.

Growth averages 2.6 percent per year between 2016 and 2024.

Lower oil prices reduce inflation in 2015.

The unemployment rate continues to decline slowly.

Short-term interest rates increase to near pre-recession levels by 2017.

Lower feed, fuel prices reduce 2015 production costs

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Oil prices recover after sharp decline

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Macroeconomic assumptions

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Real GDP growth (Percentage change from previous year)United States 2.4 3.1 2.7 2.7 2.4 2.8 2.8 2.6 2.4 2.4 2.4China 7.3 6.5 6.7 6.8 7.1 7.3 7.3 6.9 6.7 6.2 6.0World 2.7 3.0 3.4 3.5 3.6 3.7 3.8 3.7 3.6 3.5 3.4

Population growthUnited States 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7World 1.1 1.1 1.1 1.1 1.0 1.0 1.0 1.0 0.9 0.9 0.9

U.S . CPI, all urban consumers 1.6 0.1 2.3 2.4 2.5 2.4 2.5 2.4 2.2 2.3 2.2

(Percent)U.S . unemployment rate 6.2 5.5 5.3 5.2 5.3 5.3 5.1 5.0 5.1 5.1 5.13 month Treasury bill rate 0.0 0.4 1.6 3.2 3.5 3.5 3.5 3.5 3.5 3.5 3.5Prime interest rate 3.3 3.5 4.6 6.3 6.8 6.8 6.8 6.8 6.8 6.8 6.8

Petroleum prices (Dollars per barrel)West Texas intermediate 93.01 58.24 71.07 80.64 89.90 98.69 109.47 119.86 126.36 133.40 141.39Refiners acquisition cost 91.54 55.71 68.16 77.25 86.18 94.93 105.58 115.63 121.69 128.46 136.16

Natural gas price (Dollars per million BTU)Henry Hub 4.37 3.73 3.85 4.25 4.54 4.60 4.83 4.70 4.56 4.75 4.83

Exchange rates (Currency per dollar)Euro 0.75 0.83 0.81 0.77 0.76 0.75 0.74 0.74 0.74 0.73 0.73Chinese yuan 6.16 6.23 6.27 6.25 6.20 6.12 6.05 6.02 6.03 6.05 6.08

Source: IHS Global Insight, Jan. 2015, except exchange rates and non U.S . economic and population growth are from IHS Global Insight, Dec. 2014.

Indices of prices paid by farmers

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Production items, interest, (2011=100)taxes andwages 112 109 109 110 112 114 117 120 122 124 127Production items 113 110 109 109 111 113 116 119 121 122 124

Feed 113 102 102 103 103 105 105 105 104 103 101Livestock & poultry 154 158 141 126 117 115 116 120 123 126 130Seeds 114 113 114 115 118 121 125 128 131 134 136Fertilizer 96 91 89 89 90 93 96 97 96 96 95

Mixed fertilizer 87 85 84 84 85 87 90 91 90 89 88Nitrogen fertilizer 104 95 92 91 93 97 100 101 100 99 98Potash and phosph. 100 99 98 98 99 101 104 105 105 106 106

Agricultural chemicals 110 109 110 113 117 121 126 130 133 136 139Fuels 98 76 81 87 94 101 110 118 123 129 135Supplies & repairs 106 108 109 111 113 115 118 120 122 123 125Autos & trucks 104 105 108 110 112 115 117 118 120 122 123Farmmachinery 111 110 112 113 117 121 125 128 131 134 136Building material 107 107 110 113 115 117 119 120 121 123 124Farm services 109 110 113 116 120 124 128 132 136 140 144

Interest* 101 103 107 114 117 119 122 125 127 130 133Taxes** 105 105 107 109 112 115 120 123 127 131 135Wage rates 108 110 113 117 121 125 129 134 138 143 147

*Interest per acre on farm real estate debt and interest rate on farm non real estate debt.**Farm real estate taxes payable per acre.

2014 is the second year in a row of record U.S. corn production. Although area was the lowest it has been since 2010, yields were at an all-time high.

Corn production topped 14.2 billion bushels in 2014. This is a 32% increase from two years ago.

The larger corn crops in 2013 and 2014 after three years of drought are the primary cause of lower corn prices.

High prices caused by the drought resulted in reduced use of corn during the 2012/13 marketing year.

Increased production for the 2013/14 marketing year allowed use to recover, and use remains largely flat for the 2014/15 marketing year.

Ending stocks in 2014/15 increase for the second year in a row, putting downward pressure on prices for the near-term.

The main source of demand growth into the future comes from export markets.

After several years of record returns, market revenues fell in 2013/14 and again in 2014/15. Lower prices more than offset the yield increases.

Variable expenses (which exclude land costs) fall in the short term as fertilizer and fuel prices moderate.

Projected farm program payments rise in the short term with the new farm bill and decreasing prices, but remain small relative to revenues.

Corn

Corn returns decline for a second straight year

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Corn production sets record again in 2014/15

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Corn stocks increase again, other use remains flat

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Corn supply and use

September August year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million acres)Planted area 90.6 87.9 90.3 90.7 91.1 91.2 91.1 91.1 91.1 90.9 90.7Harvested area 83.1 80.2 82.3 82.7 83.0 83.1 83.1 83.1 83.0 82.9 82.7

(Bushels per harvested acre)Yield 171.0 165.1 167.0 168.7 170.2 171.9 173.8 175.5 176.9 178.4 180.4

(Million bushels)Supply 15,472 15,152 15,466 15,706 15,885 16,027 16,173 16,337 16,491 16,638 16,840Beginning stocks 1,232 1,890 1,691 1,729 1,723 1,707 1,703 1,725 1,776 1,830 1,886Production 14,216 13,237 13,751 13,952 14,137 14,295 14,444 14,587 14,690 14,783 14,928Imports 25 25 25 25 25 25 25 25 25 25 25

Domestic use 11,831 11,707 11,888 12,016 12,089 12,128 12,183 12,221 12,231 12,244 12,266Feed and residual 5,278 5,162 5,284 5,312 5,321 5,311 5,283 5,271 5,269 5,286 5,314Ethanol and coproducts 5,152 5,146 5,196 5,284 5,341 5,382 5,457 5,499 5,503 5,491 5,476HFCS 491 488 492 497 499 501 503 504 505 505 505Seed 22 23 23 23 23 23 23 23 23 23 23Food and other 888 887 894 900 904 910 917 924 932 939 947

Exports 1,751 1,755 1,849 1,967 2,089 2,196 2,265 2,341 2,429 2,507 2,592

Total use 13,582 13,462 13,737 13,983 14,178 14,324 14,447 14,561 14,660 14,752 14,858

Ending stocks 1,890 1,691 1,729 1,723 1,707 1,703 1,725 1,776 1,830 1,886 1,982CCC inventory 0 0 0 0 0 0 0 0 0 0 0Under loan 179 167 175 168 157 153 154 163 170 177 196Other stocks 1,711 1,524 1,554 1,555 1,550 1,551 1,572 1,612 1,661 1,709 1,786

Prices, program provisions (Dollars per bushel)Farm price 3.63 3.89 3.90 4.01 4.12 4.17 4.18 4.16 4.07 4.01 3.90Loan rate 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95Reference price 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70

(Million acres)Base area + allocated generic 90.7 90.6 90.7 90.8 90.8 90.8 90.8 90.8 90.8 90.7 90.7

(Bushels per acre)PLC program yield 125.0 125.1 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0

(Percent)PLC participation rate 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0ARC participation rate 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0

Returns and payments (Dollars)Gross market revenue/a. 621.32 635.36 644.48 668.87 693.46 709.00 719.44 721.45 712.77 708.25 697.57Variable expenses/a. 363.63 350.34 346.64 349.70 356.79 367.47 380.24 390.50 395.49 399.53 403.15Market net return/a. 257.69 285.03 297.84 319.17 336.66 341.53 339.20 330.95 317.27 308.72 294.42Marketing loan benefits/a.* 0.00 0.22 0.12 0.12 0.15 0.05 0.04 0.08 0.01 0.04 0.18Payments to participantsPLC/base a.* 9.96 23.82 24.91 22.13 18.80 16.50 17.18 20.24 20.58 21.82 28.00ARC/base a.* 42.64 38.83 29.39 13.60 9.69 8.50 10.29 12.44 13.92 15.71 17.90

Insurance net indemnities/a.* 24.47 23.47 23.56 24.81 26.80 27.77 29.11 28.88 29.50 29.89 29.13

*Marketing loan benefits and insurance net indemnities are averaged across all acres. PLC andARC payments are per participating acre.All projections are averages across 500 stochastic outcomes.

The 2014 soybean crop exceeded the previous record by over 18%. This was achieved by both a record yield and area.

Soybean area is expected to set a new record in 2015 and remain high given strong global demand.

Even with increased use in 2014/15, the consumption of soybeans cannot match the record production.

If yields decline to more normal levels in 2015, production and use of soybeans may be in closer balance.

Increasing demand from China is the primary cause of increases in U.S. soybean exports.

Domestic soybean crush also increases in response to rising demand for U.S. soybean meal and soybean oil.

Ending stocks jump sharply in 2014/15 after a very low carry-out in 2013/14.

Prices have fallen sharply in 2014/15, and a smaller decline is expected in 2015/16.

In 2014/15, the decrease in the soybean price is more than enough to offset the increased yield. This results in lower market returns.

Total and net returns decline again in 2015/16, as prices decline and yields are assumed to return to the long-term trend.

Program payments with the new farm bill could increase in 2015/16, but continue to be small relative to soybean market returns.

Soybeans

Soybean ending stocks increase sharply

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Soybean returns dip in 2014/15

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Soybean production sets record in 2014

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Soybean supply and use




(Million bushels)Supply 4,076 4,121 4,105 4,124 4,141 4,184 4,224 4,256 4,294 4,329 4,371Beginning stocks 92 398 411 387 360 349 345 347 350 359 365Production 3,969 3,708 3,679 3,722 3,766 3,820 3,865 3,893 3,930 3,955 3,991Imports 15 15 15 15 15 15 15 15 15 15 15

Domestic use 1,905 1,949 1,955 1,962 1,963 1,969 1,993 2,005 2,023 2,052 2,077Crush 1,790 1,837 1,843 1,849 1,850 1,855 1,877 1,888 1,903 1,931 1,954Seed and residual 115 112 112 113 113 114 116 117 120 121 123

Exports 1,772 1,760 1,763 1,803 1,829 1,870 1,884 1,901 1,913 1,911 1,926

Total use 3,678 3,709 3,718 3,765 3,792 3,839 3,877 3,906 3,936 3,964 4,003

Ending stocks 398 411 387 360 349 345 347 350 359 365 368CCC inventory 0 0 0 0 0 0 0 0 0 0 0Under loan 14 24 24 22 20 20 21 22 24 26 28Other stocks 384 387 363 338 328 324 327 328 334 339 340

Prices, program provisions (Dollars per bushel)Farm price 10.02 9.29 9.44 9.79 10.26 10.45 10.36 10.45 10.18 9.99 9.87Illinois processor price 10.35 9.75 9.90 10.24 10.69 10.88 10.79 10.87 10.61 10.44 10.32Loan rate 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00Reference price 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40





Insurance net indemnities/a.* 4.03 15.39 14.05 15.00 16.03 17.09 17.41 17.81 18.07 17.97 18.05(Dollars per bushel)

Crushmargin 1.99 1.82 1.76 1.75 1.70 1.66 1.78 1.72 1.71 1.80 1.77


Unlike corn and soybeans, U.S. wheat yields were down in 2014, resulting in a second straight year of declining production.

Even though projected planted wheat acreage is down in 2015, more typical weather might allow more of the crop to be harvested and yields to increase.

Imports, primarily from Canada, explain the continuing difference between production and total use.

The weakening of the corn price has led to less wheat being used for feed in 2013/14 and 2014/15.

Exports declined sharply in 2014/15 because of strong competition from other exporters and cheaper U.S. corn.

Exports slowly rebuild beginning in 2015/16, but competing exporters will continue to capture most of the world wheat market.

Food use of wheat increases with population.

Although U.S. wheat production was down in 2014/15, abundant domestic supplies of other crops and plentiful foreign production suppressed the price.

Lower prices and yields result in reduced receipts in 2014/15. Projected prices and returns fall further in 2015/16.

Net returns to U.S. wheat producers remain well above pre-2007 levels.

Wheat

Wheat non-food use declines in 2014/15

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Wheat production falls in 2014/15

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Wheat supply and use

June May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25



(Million bushels)Supply 2,796 2,971 2,998 3,034 3,041 3,050 3,070 3,083 3,096 3,121 3,154Beginning stocks 590 683 727 728 715 705 699 698 704 713 727Production 2,026 2,118 2,100 2,133 2,152 2,169 2,195 2,209 2,217 2,234 2,254Imports 180 169 171 173 175 176 176 175 175 174 174

Domestic use 1,190 1,246 1,249 1,246 1,250 1,257 1,264 1,277 1,290 1,301 1,310Feed and residual 157 201 196 186 182 182 181 186 189 191 192Seed 73 72 73 74 74 74 74 75 75 75 75Food and other 960 972 980 986 994 1,001 1,008 1,017 1,026 1,034 1,043

Exports 923 998 1,021 1,073 1,087 1,094 1,107 1,101 1,094 1,093 1,104

Total use 2,113 2,243 2,270 2,319 2,336 2,351 2,371 2,378 2,384 2,394 2,414

Ending stocks 683 727 728 715 705 699 698 704 713 727 741CCC inventory 0 0 0 0 0 0 0 0 0 0 0Under loan 23 40 40 36 34 33 33 34 36 39 41Other stocks 660 687 688 679 671 666 666 670 676 688 699

Prices, program provisions (Dollars per bushel)Farm price 6.13 5.17 5.28 5.48 5.66 5.77 5.81 5.70 5.59 5.46 5.36Loan rate 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94Reference price 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50







Upland cotton acreage is likely to fall sharply in 2015, given low cotton returns in absolute terms and relative to competing crops.

Large international stocks limit export and price prospects. Domestic mill use is relatively flat and accounts for a small share of total use of U.S. cotton.

U.S. cotton competes well on quality terms, supporting export sales.

China continues to be the main source of uncertainty in world cotton markets.

China’s end-of-year cotton stocks are now almost twice as large as the amount of cotton China produces or uses each year.

Recent policy changes in China should end stock accumulation, but it is not clear when and how existing stocks will be reduced.

Cotton revenues per acre harvested fall in 2014/15, as both prices and yields decline.

Cotton returns stay below 2013/14 levels through the baseline.

Cotton prices sometimes drop enough to trigger marketing loan benefits.

Transition payments provide support in 2014, and a new crop insurance program, STAX, is available in 2015.

Upland cottonCotton acreage, production fall in 2015

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China's cotton stocks remain a source of uncertainty

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Cotton profit margins remain tight

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August July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25


(Pounds per harvested acre)Yield 781 799 806 816 826 833 841 850 859 867 876

(Million bales)Supply 17.83 17.75 18.14 18.65 18.67 18.48 18.45 18.59 18.92 19.04 19.34Beginning stocks 2.33 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88Production 15.50 13.21 13.42 13.88 13.76 13.65 13.64 13.77 14.07 14.28 14.46Imports 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Domestic mill use 3.76 3.88 3.95 3.98 3.97 3.93 3.89 3.85 3.80 3.76 3.71

Exports 9.54 9.16 9.42 9.77 9.87 9.74 9.74 9.90 10.36 10.41 10.73

Total use 13.30 13.04 13.37 13.76 13.84 13.67 13.63 13.75 14.16 14.16 14.44

Ending stocks 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88 4.90CCC inventory 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Other stocks 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88 4.90

Prices, program provisions (Cents per pound)Farm price 61.8 60.0 60.3 60.3 62.0 62.8 63.2 63.8 65.2 64.7 65.2Adjusted world price 48.7 50.6 51.1 51.3 53.9 54.4 54.8 55.5 58.0 57.2 58.1Loan rate 52.0 52.0 49.0 49.1 49.2 49.3 49.9 49.9 49.9 50.3 50.4

(Dollars per ton)Cottonseed price 199.69 191.66 188.50 192.36 200.06 203.98 204.83 203.64 198.88 195.86 192.40

(Million acres)Base area n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Returns and payments (Dollars)Gross market revenue/a. 594.30 586.57 592.84 603.32 630.06 644.27 655.52 665.07 681.78 681.43 690.35Variable expenses/a. 523.10 503.88 509.17 521.12 536.12 552.26 572.40 587.68 597.29 608.65 618.68Market net return/a. 71.20 82.69 83.67 82.20 93.94 92.01 83.12 77.39 84.49 72.78 71.67Marketing loan benefits/a.* 53.50 71.31 58.56 58.50 44.62 43.62 43.04 42.91 31.86 35.90 31.55Transition payments/base a.* 33.33 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.Insurance net indemnities/a. 40.53 44.29 49.49 49.53 50.40 52.22 53.55 54.35 55.65 56.22 56.91

*Marketing loan benefits, transition payments and insurance net indemnities are averaged across all acres.All projections are averages across 500 stochastic outcomes.

U.S. sorghum production rebounded in 2013 and 2014. Stronger export demand helps sustain the higher production levels.

China accounts for the big increase in sorghum exports. This has allowed sorghum to sell at a premium to corn in 2014/15.

The baseline assumes China’s demand for sorghum imports will abate enough that sorghum prices will return to a more typical relationship to corn prices. There are no guarantees this will occur.

As with several other crops, sorghum returns have been declining since 2012/13.

Projected average sorghum prices are near or below the levels that trigger PLC payments.

Higher PLC participation rates for sorghum allow more acres to be eligible for SCO, thereby increasing crop insurance net indemnities.

Unlike other crops, barley returns have remained strong, dipping only slightly in 2014/15.

Like sorghum, average barley projected prices are near or below levels that trigger PLC payments.

High expected PLC payments discourage ARC participation and encourage SCO enrollment.

Sorghum and barley


Sorghum production and exports increase in 2013/14

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Sorghum returns

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Supply and use (Million bushels)Production 433 388 390 390 389 388 388 389 388 387 388Imports 0 0 0 0 0 0 0 0 0 0 0Domestic use 167 166 171 173 172 172 171 170 167 164 159Exports 269 225 218 218 217 215 217 217 220 222 227Ending stocks 31 27 28 27 27 27 28 29 30 31 33

Prices, returns and payments (Dollars)Farm price/bu. 3.80 3.62 3.67 3.76 3.86 3.89 3.88 3.86 3.80 3.76 3.71Market net return/a. 107.74 81.80 84.93 89.11 90.91 87.78 83.47 76.99 71.19 66.33 60.50Marketing loan benefits/a.* 0.00 0.44 0.55 0.28 0.36 0.38 0.27 0.20 0.23 0.17 0.24Payments to participantsPLC/base a.* 7.71 26.79 24.95 23.84 20.82 20.09 20.38 23.01 22.63 23.80 26.01ARC/base a.* 11.26 17.81 11.94 7.23 6.76 6.76 6.76 7.45 8.18 8.64 9.22


*Marketing loan benefits and insurance net indemnities are averaged across all acres. PLC and ARC payments are per participating acre.All projections are averages across 500 stochastic outcomes.

Barley supply and use

June May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25




Prices, returns and payments (Dollars)All barley farm price/bu. 5.30 4.61 4.57 4.64 4.76 4.90 4.87 4.85 4.70 4.64 4.60Feed barley price/bu. 3.41 3.23 3.21 3.29 3.39 3.48 3.47 3.45 3.35 3.29 3.23Market net return/a. 185.12 140.19 138.98 144.54 151.39 157.46 152.66 148.57 139.62 136.05 134.16Marketing loan benefits/a.* 0.00 0.58 1.13 1.18 0.92 0.60 0.59 0.90 0.98 0.73 1.60Payments to participantsPLC/base a.* 0.00 25.14 29.68 29.06 24.61 22.60 23.66 25.94 27.55 28.13 31.37ARC/base a.* 3.13 12.66 13.30 12.58 8.79 6.81 7.57 8.00 9.21 9.36 9.99



Reduced total supplies have helped keep oat prices from falling as much as prices for corn and sorghum since 2012/13.

Prices of all the major coarse grains move together in the baseline.

Projected prices for oats remain around $3.00 per bushel, and projected program payments are smaller than for other program crops.

Hay yields and production increased in 2013 and 2014 after the drought-reduced hay crop of 2012.

Hay production is expected to increase as lower returns for other crops allow land to revert to hay and cattle numbers increase.

Increased production in 2013 and 2014 allowed stocks to rebuild.

National average hay prices have declined in recent months to the lowest levels in four years.

If production and stocks rebuild as projected, national average hay prices could continue to drop to about $150 per ton.

Hay markets are particularly fragmented. National average prices might not reflect local conditions.

Oats and hay


Hay stocks stay high

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Hay prices decline with increased production

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Oats supply and use

June May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25




Prices, returns and payments (Dollars)Farm price/bu. 3.25 2.92 2.92 2.97 3.03 3.06 3.08 3.07 3.03 2.98 2.95Market net return/a. 104.65 79.04 81.75 85.06 87.28 86.86 85.83 82.61 80.07 76.54 73.43Marketing loan benefits/a.* 0.00 0.00 0.03 0.01 0.03 0.00 0.00 0.01 0.00 0.00 0.00Payments to participantsPLC/base a.* 0.00 1.27 2.25 1.70 1.69 1.29 1.26 1.44 1.61 1.58 2.27ARC/base a.* 0.15 2.54 2.50 2.58 2.02 1.77 1.58 1.66 1.80 1.89 1.96



Hay supply and use

May April year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Million acres)Harvested area 56.8 58.5 58.4 58.4 58.7 59.0 59.1 59.1 59.1 59.0 58.9

(Tons per acre)Yield 2.46 2.41 2.42 2.43 2.43 2.44 2.45 2.46 2.47 2.48 2.48

Supply and use (Million tons)Production 139.8 141.0 141.2 141.8 142.8 144.0 145.0 145.6 145.8 146.0 146.2Disappearance 136.0 139.2 141.1 142.3 143.2 144.1 144.8 145.2 145.4 145.5 145.7Ending stocks 22.9 24.7 24.8 24.3 23.9 23.8 24.0 24.3 24.8 25.3 25.8

(Dollars per ton)All hay farm price 174.92 152.95 149.02 154.69 161.76 165.31 165.98 164.45 161.99 159.76 156.96

Long grain rice area and production increased in 2014, and competitor rice prices remained below U.S. prices.

As a result, long grain rice prices drop below $13 per hundredweight in 2014/15. Projected prices are steady for 2015-2024.

Japonica rice, produced in California, commands a large premium to other classes of rice.

Future production and prices of Japonica rice depend on water availability.

High prices and yields resulted in record levels of per-acre revenues for U.S. rice producers in 2013/14.

Declines in rice prices in 2014/15 and 2015/16 reduce producer returns.

Projected average long grain rice prices drop below the levels that trigger PLC payments.

Despite a dip in 2015/16, sugar prices remain above the low prices experienced in 2012/13.

The U.S.-Mexico agreement on sugar trade is incorporated in this baseline, resulting in lower expected exports from Mexico to the U.S.

Average sugar prices remain above loan rates, but there are a few stochastic outcomes in which prices fall to support levels in years with big crops.

Rice and sugar


Long grain rice prices remain near 2014/15 level

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Rice returns peak in 2013/14, then decline

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Sugar prices remain above recent lows

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Rice supply and use

August July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25


(Pounds per harvested acre)Yield 7,572 7,523 7,618 7,694 7,760 7,816 7,873 7,939 8,005 8,067 8,130

Supply and use (Million hundredweight)Production 221.0 209.3 220.1 223.2 224.2 222.2 221.6 222.2 223.6 225.7 227.8Imports 22.1 23.2 23.6 24.2 24.8 25.3 25.9 26.3 26.7 27.1 27.4Domestic use 131.1 132.8 133.6 135.0 136.0 137.4 138.7 140.1 141.4 142.8 144.1Exports 103.5 100.7 107.9 110.6 112.1 110.7 109.5 109.0 109.1 109.8 110.8Ending stocks 40.4 39.4 41.5 43.3 44.2 43.6 42.9 42.4 42.2 42.4 42.8

Prices, returns and payments (Dollars)Farm price/cwt. 13.87 13.86 13.72 13.71 13.74 13.82 13.90 13.91 13.85 13.84 13.88Long grain 12.22 12.31 12.43 12.38 12.50 12.54 12.57 12.55 12.51 12.46 12.50Japonica 20.24 18.73 18.55 18.53 18.57 18.68 18.80 18.81 18.73 18.71 18.76Other medium/short 14.88 14.41 14.27 14.25 14.28 14.37 14.46 14.47 14.41 14.39 14.43

Market net return/a. 464.21 502.78 494.67 486.40 476.92 468.26 455.53 442.30 433.19 426.03 424.67Marketing loan benefits/a.* 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Payments to participantsPLC/base a.* 66.40 67.12 65.29 67.49 63.79 62.69 60.69 62.80 64.50 65.04 64.33ARC/base a.* 0.23 2.18 7.25 6.45 4.86 3.61 3.62 4.31 4.49 4.99 5.07



Sugar supply and use

October September year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million acres)Sugar cane harvested 0.829 0.864 0.841 0.831 0.824 0.814 0.804 0.796 0.789 0.783 0.777Sugar beet planted 1.162 1.252 1.204 1.225 1.227 1.214 1.209 1.202 1.202 1.198 1.197Sugar beet harvested 1.147 1.222 1.175 1.196 1.198 1.185 1.180 1.173 1.174 1.170 1.169

Supply and use (Thousand tons)Production 8,609 9,207 9,005 9,161 9,263 9,279 9,325 9,354 9,429 9,478 9,569Cane sugar 3,739 3,817 3,733 3,705 3,692 3,669 3,641 3,616 3,594 3,577 3,572Beet sugar 4,869 5,390 5,272 5,456 5,571 5,611 5,685 5,738 5,835 5,901 5,997

Imports 3,557 3,457 3,362 3,378 3,405 3,457 3,512 3,571 3,629 3,689 3,751Domestic use 12,127 12,202 12,217 12,282 12,396 12,478 12,572 12,659 12,781 12,899 13,044Exports 250 250 251 250 250 249 249 249 249 249 249Ending stocks 1,584 1,796 1,696 1,703 1,725 1,734 1,750 1,766 1,794 1,813 1,840

Prices (Cents per pound)N.Y. spot raw sugar 27.26 24.26 25.69 26.54 26.66 26.97 27.13 27.16 26.94 26.89 26.66Refined beet sugar 36.48 32.26 34.18 35.31 35.40 35.78 35.93 35.93 35.55 35.43 35.05

After the record crop of 2012, producers sharply reduced peanut area and production in 2013. 2014 production reverted to the long-term average.

Peanut yields were above the long-term trend for the third straight year in 2014.

2015 area is expected to increase as prices for competing crops weaken. More typical yields would offset this effect on production.

Peanut returns have declined from the record levels of 2012/13.

With average projected market prices significantly below the reference price, PLC payments could be quite large for peanuts.

PLC payments are tied to base acres. Only in the case of generic base (former cotton base acreage) do actual plantings affect PLC payments.

Sunflower seed prices declined in 2013/14 in response to larger global oilseed supplies and lower vegetable oil prices.

In 2014/15, a further decline in sunflower seed prices was offset by a recovery in average yields, so returns are largely unchanged.

Projected average sunflower seed prices are below the reference price.

Peanuts and sunflower seedReduced production draws down peanut stocks

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Peanut supply and use

August July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25



Supply and use (Million pounds)Production 5,210 5,178 5,443 5,525 5,494 5,502 5,562 5,650 5,749 5,829 5,829Imports 65 65 65 65 65 65 65 65 65 65 65Domestic use 4,122 4,155 4,287 4,375 4,417 4,444 4,483 4,539 4,606 4,671 4,710Exports 1,052 1,056 1,108 1,148 1,143 1,129 1,133 1,142 1,157 1,170 1,163Ending stocks 1,960 1,992 2,105 2,172 2,172 2,166 2,176 2,210 2,261 2,313 2,334

Prices, returns and payments (Dollars)Farm price/ton 428.08 437.75 413.50 398.59 407.30 416.41 421.41 417.94 407.56 396.52 397.43Market net return/a. 278.69 275.02 232.67 205.22 220.78 233.68 233.75 223.41 203.91 183.55 188.63Marketing loan benefits/a.* 0.00 42.42 85.36 96.72 96.29 84.89 90.62 106.54 124.84 129.92 128.56Payments to participantsPLC/base a.* 142.09 127.71 136.88 147.09 138.12 135.87 133.69 132.51 132.09 142.12 145.02ARC/base a.* 29.62 45.18 54.70 52.85 42.21 39.19 37.51 38.22 39.09 42.45 45.20


Sunflower seed supply and use




Supply and use (Million pounds)Production 2,215 2,447 2,512 2,531 2,535 2,512 2,506 2,499 2,467 2,455 2,452Imports 130 130 130 130 130 130 130 130 130 130 130Domestic use 2,013 2,094 2,149 2,168 2,172 2,162 2,181 2,217 2,237 2,270 2,303Exports 354 455 484 494 494 479 451 406 356 307 273Ending stocks 178 206 215 214 214 214 219 225 230 237 243

Prices, returns and payments (Dollars)Farm price/lb. 0.205 0.196 0.198 0.204 0.208 0.211 0.212 0.211 0.208 0.206 0.205Market net return/a. 145.62 151.30 154.05 163.44 167.90 169.61 168.89 164.38 158.48 153.08 151.19Marketing loan benefits/a.* 0.00 0.04 0.13 0.01 0.07 0.16 0.13 0.10 0.03 0.08 0.10Payments to participantsPLC/base a.* 0.06 16.84 17.02 14.25 12.76 11.05 10.88 12.81 13.23 14.41 14.36ARC/base a.* 5.73 10.04 8.05 5.36 4.19 4.14 4.99 5.70 6.60 7.11 6.90


Land useCorn area falls in 2015, soybean area increases

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Lower corn prices lead to a reduction in corn area planted in 2015.

Soybean area increased sharply in 2014, and is projected to set another record high in 2015.

Wheat area is likely to decrease in 2015, as USDA reports that winter wheat seedings were down by 2 million acres.

Low prices and returns will likely reduce the total amount of land devoted to corn and soybeans in 2015.

Cotton acreage increased slightly in 2014, but declines in 2015 because of weak returns.

Sorghum acreage is projected to increase slightly in 2015 in response to strong prices relative to other crops.

Continued drought in California coupled with lower prices elsewhere push rice acreage down in the short-tem.

Land planted to 12 major crops increased in 2014 as soybean area increased by about 7 million acres.

Lower expected returns in 2015 put downward pressure on area.

The CRP cap is lower under the new farm bill, allowing more potential acres for crop production.

12 crop planted area likely to fall

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Land use for major crops and the conservation reserve

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Planted area (Million acres)Corn 90.60 87.92 90.29 90.70 91.05 91.21 91.14 91.13 91.09 90.92 90.71Soybeans 83.70 84.17 82.59 82.80 83.10 83.53 83.66 83.68 83.79 83.71 83.74Wheat 56.82 55.06 54.11 54.50 54.69 54.74 54.94 54.96 54.85 54.97 55.08Upland cotton 10.85 9.54 9.64 9.83 9.65 9.46 9.37 9.37 9.48 9.50 9.53Sorghum 7.14 7.56 7.60 7.57 7.56 7.55 7.53 7.53 7.53 7.56 7.58Barley 2.98 3.33 3.43 3.39 3.33 3.29 3.27 3.21 3.17 3.06 2.99Oats 2.72 2.60 2.61 2.60 2.59 2.56 2.55 2.57 2.59 2.62 2.64Rice 2.94 2.80 2.91 2.92 2.91 2.86 2.84 2.82 2.82 2.82 2.82Sunflowers 1.56 1.70 1.74 1.74 1.74 1.71 1.70 1.69 1.67 1.65 1.64Peanuts 1.35 1.41 1.46 1.46 1.43 1.41 1.41 1.41 1.42 1.42 1.40Sugar beets 1.16 1.25 1.20 1.22 1.23 1.21 1.21 1.20 1.20 1.20 1.20Sugar cane (harvested) 0.88 0.92 0.89 0.88 0.87 0.86 0.85 0.84 0.84 0.83 0.8212 crop planted area 262.70 258.26 258.47 259.63 260.14 260.40 260.47 260.43 260.44 260.26 260.15

Hay (harvested) 56.84 58.46 58.37 58.44 58.68 58.96 59.12 59.13 59.06 58.99 58.92

12 crops + hay 319.53 316.72 316.84 318.06 318.82 319.36 319.59 319.56 319.50 319.24 319.07

Conservation reserve (CRP) 25.45 24.21 23.94 22.89 22.86 22.84 22.82 22.81 22.80 22.79 22.77

12 crops + hay + CRP 344.98 340.93 340.78 340.95 341.68 342.20 342.41 342.37 342.29 342.04 341.85

Double crop soybeans 5.61 5.09 4.94 4.99 5.05 5.09 5.10 5.08 5.05 5.01 4.98

12 crops + hay + CRP 339.37 335.84 335.84 335.97 336.64 337.11 337.30 337.29 337.24 337.03 336.87double crop soybeans

Future biodiesel use of soybean oil is constrained by competition from corn oil and other biodiesel feedstocks.

Per-capita domestic use of soybean oil for purposes other than biofuel production remains around 43 pounds per year between 2014/15 and 2024/25.

Soybean oil exports increase after 2020. Foreign use of vegetable oil in fuel increases because of rising petroleum prices.

Stagnant livestock and poultry production and competition from distillers grains have limited domestic use of soybean meal in recent years.

Projected increases in soybean meal use result from resumed growth in poultry and pork production and slower expansion of distillers grains use.

Soybean meal exports remain stable as growing world demand is met by Argentina and other competitors.

Soybean meal and oil prices have declined in 2014/15 because of large global oilseed supplies, and a further decline in 2015/16 is projected.

After 2020, vegetable oil prices are supported by rising petroleum prices.

Projected crushing margins (the difference between the value of soybean meal and oil and the cost of soybeans) average $1.75 per bushel from 2015-2024. This is slightly less than the 2011-2014 average.

Soybean productsExpansion in biodiesel use of soybean oil ends

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Soybean meal use grows with livestock production

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Soybean oil supply and use


(Million pounds)Supply 21,999 22,879 23,244 23,353 23,422 23,522 23,827 23,934 24,125 24,464 24,741Beginning stocks 1,165 1,429 1,724 1,763 1,819 1,869 1,919 1,900 1,907 1,926 1,934Production 20,674 21,290 21,361 21,430 21,443 21,494 21,748 21,874 22,058 22,378 22,647Imports 160 160 160 160 160 160 160 160 160 160 160

Domestic use 18,476 19,201 19,555 19,949 19,744 19,737 19,968 19,888 19,900 19,974 20,023Biodiesel 4,651 5,110 5,372 5,670 5,366 5,236 5,381 5,244 5,174 5,165 5,161Food and other 13,825 14,091 14,183 14,278 14,378 14,501 14,587 14,644 14,726 14,809 14,862

Exports 2,094 1,955 1,926 1,586 1,810 1,866 1,958 2,139 2,298 2,556 2,772

Total use 20,570 21,156 21,481 21,534 21,553 21,603 21,927 22,027 22,199 22,530 22,796

Ending stocks 1,429 1,724 1,763 1,819 1,869 1,919 1,900 1,907 1,926 1,934 1,945

Price (Cents per pound)Decatur 32.77 30.50 31.64 32.28 32.84 32.97 34.04 34.84 34.93 35.02 35.63

Soybean meal supply and use


(Thousand tons)Supply 43,548 44,282 44,431 44,578 44,603 44,705 45,229 45,495 45,877 46,543 47,099Beginning stocks 250 299 303 308 307 305 306 313 318 325 330Production 43,048 43,733 43,878 44,020 44,046 44,151 44,673 44,932 45,310 45,968 46,519Imports 250 250 250 250 250 250 250 250 250 250 250

Domestic use 30,357 31,706 32,563 32,770 32,801 32,973 33,294 33,634 34,310 34,805 35,364

Exports 12,892 12,273 11,560 11,501 11,498 11,426 11,623 11,543 11,242 11,408 11,398

Total use 43,249 43,979 44,123 44,271 44,299 44,399 44,916 45,177 45,552 46,213 46,763

Ending stocks 299 303 308 307 305 306 313 318 325 330 337

Price (Dollars per ton)Decatur, 48% protein 355.76 337.65 335.61 346.32 360.88 366.46 362.48 359.34 347.67 343.58 334.37

Corn products

Along with conventional ethanol production, there is modest growth in distillers dried grains with solubles (DDGS) production.

Domestic use is sustained by rising livestock feed demand overall, but limited by competition from other feeds.

Net exports remain flat throughout the projection period. Disputes regarding approved corn varieties make DDGS exports to China a key source of uncertainty.

Prices for DDGS generally move with corn prices and slightly exceed them in the projection period.

Export demand lends support to DDGS prices. China is a major source of uncertainty for U.S. exports and prices.

Wet mills produce ethanol, HFCS and other products including food-grade corn oil. Dry mills can extract nonfood-grade corn oil from distillers grains.

The baseline projects a further increase in the share of dry mill ethanol plants that extract corn oil.

The oil removed in dry mill plants is used in feed rations and biodiesel production.

A growing share of corn oil goes to these nonfood uses.

Distillers grains production expands with ethanol

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DDGS prices generally follow corn prices

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Corn product supply and use

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

High fructose corn syrup (Thousand tons, Oct. Sep. year)Production 8,630 8,601 8,682 8,791 8,840 8,897 8,946 8,998 9,019 9,047 9,059Domestic use 7,367 7,328 7,363 7,430 7,436 7,455 7,465 7,479 7,461 7,450 7,423Net exports 1,263 1,273 1,319 1,361 1,404 1,442 1,481 1,519 1,558 1,597 1,636

(Cents per pound, Oct. Sep. year)Price, 42% Midwest 23.11 22.55 23.11 23.72 23.80 24.06 24.15 24.10 23.94 23.93 23.73HFCS price/ref. sugar price 63% 70% 68% 67% 67% 67% 67% 67% 67% 68% 68%

Distillers, brewers grains (Thousand tons, Sep. Aug. year)Production (dry equiv.) 38,882 38,648 38,839 39,668 40,367 40,914 41,581 41,939 41,966 41,844 41,661Domestic use 27,609 27,338 27,559 28,402 29,114 29,651 30,278 30,606 30,604 30,472 30,272Net exports 11,273 11,310 11,280 11,266 11,253 11,263 11,303 11,333 11,363 11,372 11,389

(Dollars per ton, Sep. Aug. year)Price, IL points 144.18 147.82 149.15 153.68 158.61 160.69 159.57 158.26 154.37 152.46 148.82DDGS price/corn price 111% 106% 107% 107% 108% 108% 107% 106% 106% 106% 107%

Corn gluten feed (Thousand tons, Sep. Aug. year)Production 8,803 8,894 9,075 9,036 8,890 8,770 8,772 8,809 8,856 8,919 9,000Domestic use 7,852 7,942 8,122 8,062 7,906 7,790 7,799 7,861 7,944 8,025 8,136Net exports 952 953 953 974 984 979 973 948 912 894 864

(Dollars per ton, Sep. Aug. year)Price, 21%, IL points 125.04 126.04 125.06 124.92 125.71 126.09 125.22 125.35 124.70 123.64 122.53CGF price/corn price 96% 91% 90% 87% 86% 85% 84% 84% 86% 86% 88%

Corn glutenmeal (Thousand tons, Sep. Aug. year)Production 2,317 2,341 2,388 2,378 2,339 2,308 2,309 2,318 2,331 2,347 2,368Domestic use 1,209 1,216 1,251 1,236 1,194 1,155 1,144 1,143 1,142 1,147 1,156Net exports 1,108 1,125 1,137 1,142 1,146 1,153 1,164 1,175 1,189 1,200 1,212

(Dollars per ton, Sep. Aug. year)Price, 60%, IL points 496.96 475.13 472.10 485.20 503.38 510.73 506.15 502.41 488.42 483.42 472.21CGM price/soymeal price 140% 141% 141% 140% 139% 139% 140% 140% 140% 141% 141%

Corn oil (Million pounds, Oct. Sep. year)Production 5,515 6,204 6,662 7,133 7,415 7,513 7,598 7,651 7,667 7,669 7,670Domestic use 4,412 5,085 5,567 6,038 6,333 6,439 6,530 6,585 6,600 6,603 6,606Biodiesel 893 768 1,439 1,681 1,951 2,055 2,120 2,178 2,176 2,206 2,267Feed 1,127 2,436 2,136 2,344 2,562 2,688 2,699 2,722 2,761 2,751 2,712Food/other 2,393 1,881 1,992 2,013 1,819 1,696 1,712 1,685 1,664 1,646 1,626

Net exports 1,068 1,077 1,075 1,073 1,071 1,070 1,067 1,065 1,066 1,066 1,065Ending stocks 199 241 261 283 295 299 301 301 302 302 300

(Cents per pound, Oct. Sep. year)Chicago price 34.49 32.11 33.04 33.71 34.37 34.59 35.64 36.40 36.44 36.48 37.01Corn oil price/soyoil price 105% 105% 104% 104% 105% 105% 105% 104% 104% 104% 104%

Ethanol and biofuel policy

Record margins in 2014 led to a recovery in ethanol production relative to 2012 and 2013.

Production is projected to decline slightly in 2015 as margins become tighter.

Beyond 2015, ethanol production grows slowly as RFS requirements increase and production margins recover.

Cellulosic and non-corn ethanol production levels contribute relatively minor quantities to the total.

Sugarcane ethanol imports from Brazil continue at a very low level in 2015 before climbing in 2016.

Growing RFS requirements for advanced biofuel and low-carbon fuel requirements in California motivate sugar-based ethanol imports at modest levels.

Exports rebounded in 2014 and continue steady growth with domestic conventional ethanol prices competitive in the global market.

RFS percent requirements are unknown. These projections assume growth to 10 percent of motor fuel use.

Declining motor fuel use in later years implies a slight decline in volume requirements.

Biomass-based diesel requirements remain slightly above 1.28 billion gallons based on estimated motor fuel use.

RIN prices increase in the near term before declining in later years as market conditions make the RFS easier to meet.

Ethanol production resumes modest growth

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Ethanol supply and use

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Petroleum fuel prices (Dollars per barrel)Petroleum, W. Texas interm. 93.01 58.24 71.07 80.64 89.90 98.69 109.47 119.86 126.36 133.40 141.39Petroleum, refiners acquis. 91.54 55.71 68.16 77.25 86.18 94.93 105.58 115.63 121.69 128.46 136.16

(Dollars per gallon)Unl. gasoline, FOB Omaha 2.66 1.71 1.94 2.14 2.36 2.58 2.86 3.13 3.31 3.49 3.68Unleaded gasoline, retail 3.37 2.37 2.63 2.83 3.04 3.26 3.53 3.79 3.96 4.14 4.33

(Million gallons)Motor gasoline use* 137,460 138,364 139,662 140,666 140,464 139,462 137,726 135,463 133,042 130,615 128,257

Ethanol supply and useProduction 14,334 14,190 14,375 14,669 14,922 15,075 15,222 15,466 15,606 15,733 15,905From corn 14,175 14,047 14,194 14,449 14,674 14,806 14,935 15,156 15,269 15,365 15,500Other conventional 158 137 156 169 173 171 170 170 175 183 194Cellulosic 1 6 26 52 75 97 117 139 162 186 210

Imports 60 45 267 299 302 298 321 293 270 281 316

Domestic disappearance 13,481 13,369 13,750 14,031 14,211 14,311 14,419 14,576 14,669 14,766 14,952Exports 811 861 887 930 1,005 1,053 1,115 1,174 1,197 1,238 1,260Ending stocks 791 797 803 810 819 827 836 846 855 865 875

Ethanol prices (Dollars per gallon)Conventional rack, Omaha 2.34 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06Other advanced rack 2.40 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06Effective retail 2.56 1.89 1.84 1.91 2.00 2.10 2.25 2.37 2.48 2.58 2.66Ethanol/gasoline retail 76% 80% 70% 68% 66% 64% 64% 62% 62% 62% 62%

RIN valuesConventional ethanol 0.49 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05Advanced ethanol 0.54 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05

* Includes fuel ethanol

Renewable Fuel Standard

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Applicable percent standardOverall 9.50% 9.55% 9.35% 9.48% 9.63% 9.73% 9.80% 9.85% 9.90% 9.95% 10.00%Advanced biofuels 1.33% 1.35% 1.38% 1.40% 1.42% 1.44% 1.47% 1.49% 1.51% 1.53% 1.56%Cellulosic biofuel 0.01% 0.02% 0.05% 0.07% 0.09% 0.11% 0.13% 0.14% 0.16% 0.18% 0.18%Biomass based diesel 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13%

Required volume (Million gallons)Overall 16,231 16,717 16,437 16,800 17,070 17,188 17,157 17,053 16,953 16,842 16,722Advanced biofuels 2,095 2,368 2,418 2,475 2,516 2,547 2,565 2,575 2,586 2,594 2,600Cellulosic biofuel 33 38 62 100 129 156 181 208 237 265 295Biomass based diesel 1,321 1,319 1,325 1,335 1,335 1,330 1,319 1,305 1,290 1,275 1,260

Gaps: Conventional 14,136 14,349 14,018 14,325 14,554 14,641 14,591 14,477 14,367 14,248 14,122Advanced 80 351 368 374 385 396 405 410 414 416 415

Biomass-based diesel and biofuel plant returns

The outlook assumes the RFS percent requirements for biomass-based diesel remain at 1.13 percent going forward. This implies a volume requirement slightly above 1.28 billion gallons.

Biomass-based diesel production falls further in 2015 without the blenders tax credit in place but recovers in later years to meet RFS requirements.

Corn oil based biodiesel and renewable diesel production increase from their current levels.

Domestic biomass-based diesel use falls just below the RFS requirement in 2015. RIN stocks are used to make up the difference.

In later years, biomass-based diesel is used beyond its own requirement to help meet the advanced or overall mandates.

The U.S. remains a small net importer of biomass-based diesel in the near term, but is projected to be a small net exporter in later years.

Average dry mill ethanol net returns over operating costs fall sharply in 2015 before recovering in 2016.

Biomass-based diesel net returns continue their descent in 2015 without the blenders tax credit in place. They recover in 2016 and remain near the level of dry mill net returns.

RFS implementation and the costs of selling larger volumes of fuels with more than 10 percent ethanol remain important sources of uncertainty.

Biomass-based diesel production recovers

0.00.20.40.60.81.01.21.41.61.82.0

2008 2010 2012 2014 2016 2018 2020 2022 2024

Calendar yearB

illio

n ga

llons

Soy oil Corn oil Other fats/oils Renewable diesel Cellulosic diesel

Biomass-based diesel use exceeds RFS mandate

0.0

0.5

1.0

1.5

2.0

2008 2010 2012 2014 2016 2018 2020 2022 2024

Calendar year

Bill

ion

gallo

ns

RFS requirement Domestic use

Biofuel net returns hold steady beyond 2016

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

2008 2010 2012 2014 2016 2018 2020 2022 2024

Calendar year

Dol

lars

per

gal

lon

Dry mill ethanol Soy oil biodiesel



Biomass based diesel sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Biomass based diesel supply (Million gallons)Production 1,617 1,260 1,594 1,699 1,799 1,832 1,866 1,890 1,873 1,885 1,921From soybean oil 585 619 663 680 690 674 673 663 635 633 648From corn oil 116 100 187 218 253 267 275 283 283 286 294From other fats and oils 530 307 373 381 395 405 417 426 427 431 439From cellulosic diesel 0 0 2 9 12 15 18 21 24 27 30

Renewable diesel 387 234 368 411 449 471 483 496 504 508 510

Biomass based diesel useDomestic disappearance 1,768 1,296 1,711 1,780 1,830 1,842 1,869 1,847 1,803 1,820 1,883Net exports 96 109 105 76 29 9 4 43 70 65 38Ending stocks 136 208 196 191 190 189 189 189 189 189 189

Fuel prices and tax credit (Dollars per gallon)Biodiesel, rack 3.47 3.04 3.21 3.34 3.42 3.47 3.50 3.60 3.64 3.68 3.73#2 Diesel, refiner sales 2.81 1.86 2.10 2.29 2.51 2.73 3.01 3.28 3.46 3.64 3.84#2 Diesel, retail 3.83 2.83 3.20 3.40 3.62 3.84 4.12 4.39 4.56 4.74 4.94Biodiesel tax credit 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RIN valuesPer RIN gallon 0.56 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05Per phyiscal gallon 0.84 0.82 1.09 1.06 0.96 0.80 0.59 0.42 0.27 0.15 0.07

Biofuel plant returns

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Biodiesel costs and returns (Dollars per gallon)Biodiesel value 3.47 3.04 3.21 3.34 3.42 3.47 3.50 3.60 3.64 3.68 3.73Glycerin value 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11Soyoil cost 2.84 2.47 2.35 2.44 2.51 2.55 2.57 2.66 2.71 2.73 2.74Other operating costs 0.57 0.58 0.58 0.59 0.59 0.60 0.61 0.61 0.62 0.62 0.63Net operating return 0.17 0.10 0.39 0.41 0.43 0.43 0.43 0.44 0.43 0.44 0.46

Cornmilling for ethanol (Million bushels)Corn wet milled for ethanol 576 482 548 555 527 497 475 468 464 468 486Corn dry milled for ethanol 4,662 4,644 4,624 4,700 4,800 4,868 4,927 5,004 5,039 5,060 5,082(Share de oiling DDGS) 89% 92% 94% 95% 96% 97% 98% 98% 98% 98% 98%

Drymill ethanol costs, returns (Dollars per gallon)Ethanol value 2.34 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06Distillers grains value 0.51 0.43 0.44 0.44 0.46 0.47 0.47 0.47 0.46 0.45 0.44Corn oil value* 0.07 0.04 0.06 0.05 0.05 0.06 0.05 0.06 0.06 0.06 0.06Corn cost 1.50 1.36 1.42 1.43 1.47 1.50 1.51 1.50 1.49 1.46 1.42Fuel and electricity cost 0.20 0.20 0.18 0.19 0.21 0.21 0.22 0.21 0.21 0.22 0.22Other operating costs 0.34 0.34 0.35 0.35 0.35 0.36 0.36 0.36 0.37 0.37 0.37Net operating return 0.88 0.35 0.44 0.46 0.44 0.42 0.41 0.43 0.46 0.50 0.55

* Weighted by share of dry mills de oiling DDGs

The annual cattle inventory report released by USDA in early 2015 showed a 2.1 percent increase in beef cows, only the third annual increase since 1996 and the largest increase since 1994.

Further increases are expected due to strong profitability levels and improved pasture conditions.

Despite the expected growth, the beef cow herd will still remain smaller than the levels seen prior to 2010.

The December 2014 quarterly hog inventory report noted a sharp increase in the U.S. sow herd.

The 3.7 percent year-over-year increase is the largest in more than 16 years.

Farrow-finish profitability was strongly positive throughout 2014, and as returns are projected to be positive in 2015, further growth in the herd is expected.

The porcine epidemic diarrhea virus (PEDv) greatly impacted the number of pigs saved per litter in the first half of 2014.

Disease impacts have waned recently, and in the absence of a further significant outbreak, the amount of pork produced per sow is expected to stabilize in 2015 and return to normal growth in 2016.

The combination of a larger sow herd and more pork production per sow will result in a sharply higher pork supply.

Cattle and hogsThe beef cow herd increased during 2014

28

29

30

31

32

33

2008 2010 2012 2014 2016 2018 2020 2022 2024M

illio

n he

ad (J

an. 1

)

Beef cow inventory


Pork productivity begins to recover in 2015

3,600

3,800

4,000

4,200

4,400

4,600

4,800

5,000

2008 2010 2012 2014 2016 2018 2020 2022 2024

Poun

ds

Pork production per sow

Sow inventory grows by largest amount since 1998

5.6

5.7

5.8

5.9

6.0

6.1

6.2

6.3

2008 2010 2012 2014 2016 2018 2020 2022 2024

Mill

ion

head

(Dec

. 1 p

rior y

ear)

Sow inventory


Cattle and hogs

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

CATTLE (Million head)Beef cows (Jan. 1) 29.0 29.6 30.5 31.0 31.2 31.3 31.1 30.9 30.6 30.5 30.3Dairy cows (Jan. 1) 9.2 9.3 9.4 9.4 9.4 9.3 9.3 9.3 9.3 9.3 9.4Cattle and calves (Jan. 1) 87.7 88.3 90.5 93.2 94.9 95.2 94.8 93.9 93.0 92.4 92.1Cattle on feed (Jan. 1) 12.7 12.7 12.6 13.0 13.6 14.0 14.1 14.0 13.9 13.7 13.5

Calf crop 33.5 34.1 34.9 35.3 35.5 35.5 35.4 35.1 35.0 34.8 34.7Cattle slaughter 30.9 30.0 30.3 31.7 33.1 34.0 34.3 34.0 33.6 33.3 32.9

Cattle imports 2.3 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2Cattle exports 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

PricesTotal all grades, (Dollars per hundredweight)5 Area direct steers 154.56 156.07 149.83 136.29 126.33 121.87 121.62 123.68 126.24 127.89 129.31

600 650 #, Oklahoma CityFeeder steers 225.21 234.16 219.45 191.68 170.55 159.74 157.87 161.80 167.23 171.53 175.05

Utility cows, S ioux Falls 104.10 107.09 97.81 85.31 77.83 74.14 73.85 74.94 76.64 77.40 77.99

Cow calf returns (Dollars per cow)Receipts 1,173.71 1,216.35 1,136.58 998.09 896.88 845.27 836.81 855.25 880.95 900.55 916.56Feed expenses 246.01 241.75 251.91 254.68 261.88 268.21 270.01 268.62 266.17 262.69 260.09Non feed expenses 519.38 526.85 537.83 541.24 540.43 544.18 552.62 561.94 569.04 575.98 582.73Net returns 408.31 447.75 346.84 202.17 94.57 32.88 14.18 24.70 45.73 61.88 73.73

HOGS (Million head)Hogs for breeding (Dec. 1*) 5.76 5.97 6.19 6.19 6.07 5.93 5.82 5.75 5.74 5.76 5.80Market hogs (Dec. 1*) 59.0 60.1 64.4 67.4 67.9 67.3 66.6 66.2 66.4 67.2 68.1

Sows farrowed 11.35 11.89 12.15 12.10 11.88 11.66 11.52 11.48 11.53 11.63 11.73Pig crop 112.7 121.8 127.8 129.3 128.6 127.5 127.2 128.0 129.9 132.2 134.6Barrow and gilt slaughter 103.8 109.4 116.3 120.0 120.4 119.6 119.1 119.4 120.5 122.5 124.6

Hog imports 4.9 5.1 5.1 5.2 5.2 5.3 5.3 5.4 5.4 5.4 5.4Hog exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PricesNatl. base 51 52% lean equiv. (Dollars per hundredweight)Barrows & gilts 76.03 62.11 54.91 51.77 52.49 54.72 57.13 58.76 59.16 58.24 57.49

IA S. Minn. #1 2, 300 400 #Sows 73.52 55.07 49.34 47.08 47.70 49.54 51.60 52.87 53.30 52.69 52.28

Farrow finish returns (Dollars per hundredweight)Receipts 81.23 66.51 58.96 55.53 56.01 58.02 60.37 61.91 62.32 61.40 60.64Feed expenses 35.35 30.46 31.84 32.29 33.56 34.83 35.37 35.28 34.95 34.10 33.56Non feed expenses 22.97 22.61 22.83 23.08 23.33 23.61 23.91 24.17 24.37 24.59 24.82Net returns 22.91 13.44 4.29 0.16 0.89 0.41 1.09 2.46 3.00 2.70 2.25

* Preceding year

The total of U.S. beef, pork, chicken and turkey production should increase at the fastest rate since 2002 in 2015.

All of the growth will come from the pork and poultry sectors.

Beef production will decline for the fifth consecutive year as producers hold back more animals from market to rebuild the beef cow herd.

This will lead to an even wider spread between beef and other meat prices.

U.S. meat export volumes remained stable in recent years despite sharply higher prices and a strengthening U.S. dollar against most currencies.

Some signs of weakening export levels began to appear in the final months of 2014, and meat imports (particularly beef) were higher than in recent years.

With strong growth in domestic meat production projected for the next few years, the U.S. meat sector will need to expand international shipments to keep prices from declining sharply

The amount of meat per person available in the domestic market fell by nearly 20 pounds (8.8 percent) from 2007-2012.

Domestic meat availability is now projected to grow at rates not seen since the early 2000s.

Future meat demand strength will play a large part in determining how far prices fall in light of additional supplies.

Meat


More pork and chicken production impacts prices

40

80

120

160

200

240

280

2008 2010 2012 2014 2016 2018 2020 2022 2024D

olla

rs p

er h

undr

edw

eigh

t

Choice beef cutout Pork cutout Composite chicken

Domestic meat supply is set to increase

-2

0

2

4

6

8

10

12

1998-02 2002-06 2006-10 2010-14 2014-18 2018-22Cha

nge

over

the

perio

d, b

illio

n po

unds

Production Net exports

Meat demand strength will be crucial to prices

195

200

205

210

215

220

2008 2010 2012 2014 2016 2018 2020 2022 2024

Poun

ds p

er p

erso

n

Domestic meat consumption


Meat sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Beef (Million pounds)Production 24,320 23,801 23,923 25,053 26,229 26,965 27,279 27,197 26,995 26,796 26,642Imports 2,928 2,772 2,753 2,699 2,644 2,617 2,634 2,671 2,711 2,758 2,794Domestic use 24,718 24,088 24,063 24,883 25,831 26,436 26,672 26,609 26,430 26,257 26,132Exports 2,584 2,511 2,602 2,825 2,998 3,119 3,230 3,260 3,282 3,301 3,306Ending stocks 530 503 513 558 601 627 638 638 632 629 627

PorkProduction 22,866 24,036 25,281 26,133 26,290 26,189 26,143 26,315 26,635 27,188 27,750Imports 1,000 925 913 916 923 939 957 968 981 986 987Domestic use 19,114 19,787 20,693 21,354 21,360 21,130 20,948 20,958 21,108 21,451 21,805Exports 4,829 5,145 5,449 5,657 5,852 6,009 6,161 6,325 6,501 6,705 6,913Ending stocks 540 569 621 657 659 647 638 638 646 663 681

BroilerProduction 38,173 40,176 41,209 41,868 42,389 42,812 43,279 43,867 44,499 45,202 45,895Domestic use 30,989 32,835 33,745 34,227 34,506 34,701 34,946 35,303 35,732 36,237 36,733Exports 7,291 7,407 7,556 7,753 8,005 8,240 8,462 8,691 8,894 9,090 9,289Ending stocks 675 726 752 760 759 754 752 754 757 765 772

TurkeyProduction 5,739 6,001 6,155 6,280 6,349 6,384 6,417 6,470 6,533 6,607 6,680Domestic use 5,006 5,166 5,334 5,453 5,517 5,541 5,557 5,591 5,636 5,692 5,748Exports 799 814 830 842 854 870 888 906 924 942 960Ending stocks 200 248 268 282 289 292 295 299 304 310 316

Wholesale prices (Dollars per hundredweight)Boxed beef cutout 239.26 240.73 232.98 215.87 203.75 198.89 199.05 201.90 205.31 207.28 208.86Pork cutout 110.19 95.87 85.94 80.23 80.70 83.67 87.10 89.58 90.89 90.26 89.61National wholesale broiler 104.87 94.53 90.78 90.71 92.39 94.75 96.84 98.05 98.69 98.78 98.93Natl. wholesale turkey hens 107.64 101.85 95.85 93.29 93.56 95.37 97.50 98.89 99.74 100.04 100.38

Retail prices (Dollars per pound)Beef 5.97 6.20 6.15 6.02 5.89 5.86 5.86 6.03 6.18 6.31 6.44Pork 4.02 3.90 3.76 3.68 3.72 3.83 3.99 4.09 4.14 4.13 4.12Broiler 1.96 1.97 1.96 1.96 2.01 2.06 2.11 2.14 2.15 2.15 2.15Turkey 1.63 1.62 1.59 1.58 1.60 1.63 1.67 1.70 1.72 1.74 1.76

Per capita consumption (Pounds, retail)Beef 54.3 52.5 52.0 53.3 54.9 55.8 55.8 55.3 54.5 53.7 53.1Pork 46.5 47.8 49.6 50.7 50.3 49.4 48.6 48.2 48.2 48.6 49.1Broiler 83.5 87.8 89.5 90.0 90.0 89.8 89.7 90.0 90.4 91.0 91.5Turkey 15.7 16.1 16.5 16.7 16.8 16.7 16.6 16.6 16.6 16.6 16.7Total 200.0 204.1 207.5 210.8 212.0 211.7 210.8 210.0 209.6 209.9 210.3

A decline in input costs coupled with a record high all milk price led to profitability at or near record levels in 2014.

Input costs are projected to decline further in 2015, but an even larger drop in projected milk prices will cause 2015 profitability levels to be more in line with the historical average.

The milk price outlook depends upon the strength of international demand for dairy products. China has sharply increased its purchases of milk powders this decade, but its slowdown in purchases in 2014 led to price declines.

The U.S. dairy herd added 100 thousand cows (1.1 percent) during 2014.

Further increases are expected during the first portion of 2015, though the rate at which prices decline will have an effect.

Milk production per cow increased by 2.0 percent in 2014, the second highest growth in yields since 2005.

The Margin Protection Program-Dairy (MPP-Dairy) became operational late last year.

Enrollment information recently released by USDA shows that about half of U.S. licensed dairy operations signed up for 2015 coverage.

If dairy margins fall at least as much as projected in 2015, participation could increase in 2016. Producers must enroll by September 30, 2015 to be eligible for 2016.

Dairy


Producers have responded by building the dairy herd

9.05

9.10

9.15

9.20

9.25

9.30

9.35

9.40

9.45

2008 2010 2012 2014 2016 2018 2020 2022 2024

Mill

ion

head

Dairy cow inventory

2014 was a profitable year for the dairy industry

0

4

8

12

16

20

24

28

2008 2010 2012 2014 2016 2018 2020 2022 2024D

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Feed costs Other operating costs All milk price

Margins retreat in 2015 and 2016

4

6

8

10

12

14

2008 2010 2012 2014 2016 2018 2020 2022 2024

Dol

lars

per

hun

dred

wei

ght

Calculated MPP-Dairy margin


Dairy sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Milk supplyDairy cows (thou. head) 9,255 9,362 9,393 9,385 9,353 9,325 9,323 9,330 9,339 9,354 9,371

California 1,780 1,786 1,782 1,776 1,765 1,756 1,753 1,752 1,754 1,757 1,762Wisconsin 1,270 1,281 1,284 1,283 1,280 1,278 1,279 1,283 1,285 1,288 1,289New York 615 621 620 616 611 607 606 605 606 606 608Idaho 575 588 596 601 603 605 607 611 614 617 621Pennsylvania 530 532 529 523 518 513 511 509 508 508 508Minnesota 460 464 465 463 461 458 457 456 455 454 454Texas 462 472 478 481 483 484 486 488 490 491 493Michigan 390 401 408 412 416 419 423 427 431 435 439New Mexico 323 326 326 325 323 322 321 321 320 320 320Ohio 266 269 270 269 267 265 264 264 263 262 262Rest of U.S . 2,584 2,621 2,635 2,635 2,627 2,618 2,615 2,615 2,614 2,614 2,616

Milk yield (lbs. per cow) 22,258 22,567 22,886 23,231 23,541 23,853 24,147 24,434 24,714 24,990 25,270Milk production (bil. lbs.) 206.0 211.3 215.0 218.0 220.2 222.4 225.1 228.0 230.8 233.8 236.8

Min. FMMO class prices (Dollars per hundredweight)Class I mover 23.29 16.99 16.94 17.39 17.84 18.22 18.41 18.49 18.56 18.69 18.79Class II 23.34 15.74 15.94 16.48 16.79 17.17 17.29 17.37 17.53 17.71 17.84Class III 22.34 16.08 15.90 16.32 16.70 17.13 17.32 17.34 17.33 17.34 17.27Class IV 22.09 15.04 15.24 15.78 16.09 16.47 16.59 16.67 16.83 17.01 17.14

All milk price 23.97 17.59 17.55 18.01 18.39 18.79 18.96 19.02 19.07 19.16 19.19

Actual dairy prod. margin 13.32 8.33 8.50 9.12 9.26 9.34 9.33 9.38 9.49 9.79 9.96

Wholesale prices (Dollars per pound)Butter, CME 2.16 1.52 1.40 1.42 1.44 1.48 1.47 1.47 1.47 1.46 1.45Cheese, Amer., 40#, CME 2.11 1.59 1.57 1.61 1.65 1.69 1.71 1.71 1.71 1.71 1.70Nonfat dry milk, AA 1.74 1.23 1.32 1.37 1.40 1.42 1.44 1.45 1.47 1.49 1.51Evaporatedmilk 2.24 2.07 2.05 2.07 2.11 2.14 2.16 2.18 2.20 2.22 2.24

Dairy product production (Million pounds)American cheese 4,510 4,606 4,660 4,691 4,716 4,740 4,785 4,839 4,887 4,935 4,992Other cheese 6,897 7,087 7,233 7,353 7,460 7,585 7,721 7,877 8,030 8,188 8,355Butter 1,823 1,886 1,943 1,988 2,019 2,043 2,070 2,096 2,122 2,148 2,174Nonfat dry milk 2,194 2,165 2,277 2,365 2,429 2,491 2,564 2,643 2,716 2,792 2,868

Dairy product exportsAmerican cheese 229 230 248 256 259 263 267 272 277 282 287Other cheese 577 560 584 595 599 603 609 616 623 630 638Butter 139 139 154 160 156 154 158 162 165 169 173Nonfat dry milk 1,198 1,152 1,211 1,273 1,299 1,326 1,358 1,393 1,425 1,457 1,486

Per capita consumption (Pounds)Butter 5.4 5.4 5.5 5.6 5.7 5.7 5.8 5.8 5.8 5.8 5.9Nonfat dry milk 2.9 3.1 3.2 3.3 3.4 3.4 3.5 3.6 3.7 3.8 3.9Total cheese 33.7 34.2 34.6 34.8 34.9 35.1 35.3 35.6 35.9 36.2 36.5American 13.4 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.6Other 20.4 20.8 21.0 21.2 21.4 21.6 21.8 22.1 22.4 22.6 22.9

Total fluid milk 185.6 183.6 181.9 181.3 180.0 179.3 178.6 177.5 176.7 176.0 175.2Ice cream 26.3 27.3 27.4 27.3 27.2 27.2 27.1 27.0 27.0 27.0 27.0

The CPI for food increased by 2.4 percent in 2014, despite growth of 7.2 percent in the CPI for meat.

As additional meat supplies lead to reduced prices for most meat products in 2015, the CPI for food is projected to grow by only 1.6 percent.

Food price growth should fall further in 2016 as lower commodity prices this year are not immediately passed through to the retail level.

Raw commodity values only account for 15-20 percent of U.S. consumer food spending.

The cost of transforming raw farm commodities to finished food products is highly dependent on a number of macroeconomic factors.

Sharply lower energy prices and modest wage rate growth help to keep the costs of finished food products from growing much through 2016.

Food prices and expenditures

Continued improvement in the U.S. economy has contributed to higher food price inflation for food away from home in recent months.

Economic growth is one factor behind the long term trend of an increasing share of U.S. consumer food spending directed to food consumed away from home.

Food away from home expenditures only accounted for 40-42 percent of total food spending from 1986-1992, but will soon account for more than half of the total.

Food inflation slows in 2015

0

1

2

3

4

5

6

2008 2010 2012 2014 2016 2018 2020 2022 2024Pe

rcen

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CPI for food


Slow growth in food marketing costs through 2016

-1012345678

2008 2010 2012 2014 2016 2018 2020 2022 2024

Perc

ent c

hang

e

CPI for food Macro index for marketing costs

Spending on food away from home increases

46

47

48

49

50

51

52

2008 2010 2012 2014 2016 2018 2020 2022 2024

Perc

ent

Share of food expenditures away from home


Consumer price indices for food

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(1982 84=100)Total food 242.7 246.6 248.0 251.7 256.6 262.4 268.8 275.5 281.8 287.6 293.4(Inflation rate) 2.4% 1.6% 0.6% 1.5% 1.9% 2.3% 2.4% 2.5% 2.3% 2.1% 2.0%

Food at home 239.5 241.6 241.5 244.9 249.7 255.5 261.9 268.6 274.8 280.4 286.1Cereal and bakery 271.1 270.0 272.1 276.9 282.8 288.8 295.1 301.3 306.7 311.6 316.8Meat 253.0 257.9 253.5 252.3 254.1 259.3 266.6 274.7 282.4 289.0 295.6Dairy 225.3 221.0 220.3 225.6 231.2 237.0 242.4 247.7 252.4 256.9 261.5Fruit and vegetables 294.4 300.2 304.3 312.4 321.1 330.2 339.5 349.1 357.9 366.3 375.0Other food at home 206.2 208.1 208.6 211.7 216.0 220.4 224.9 229.6 233.9 237.9 241.7Sugar and sweets 209.3 210.6 211.1 214.3 219.4 224.0 228.7 233.4 237.7 241.6 245.6Fats and oils 229.7 229.8 229.2 233.7 239.3 245.0 251.0 257.3 263.3 268.9 274.6Other prepared items 219.9 222.3 223.2 226.3 230.5 234.9 239.6 244.3 248.8 252.8 256.6Non alc . beverages 166.0 167.8 167.9 170.5 174.5 178.3 182.1 186.2 189.9 193.2 196.6

Food away from home 249.0 255.2 258.9 263.1 268.0 273.7 280.1 286.8 293.3 299.3 305.4

Consumer expenditures for food

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Dollars per person)Total food per capita 4,358 4,381 4,420 4,535 4,660 4,786 4,917 5,048 5,168 5,281 5,396

Food at home 2,236 2,217 2,224 2,270 2,325 2,382 2,441 2,499 2,552 2,601 2,651Food away from home 2,121 2,164 2,196 2,265 2,334 2,404 2,476 2,549 2,616 2,680 2,745

Multiply by population for: (Billion dollars)Total U.S. food expenditures 1,389 1,408 1,432 1,481 1,534 1,588 1,645 1,702 1,755 1,807 1,861

Government costs

Net CCC outlays were $12 billion in FY 2014, with direct payments and livestock disaster assistance accounting for most of the spending.

Under the 2014 farm bill, direct payments end and ARC and PLC payments begin in FY 2016.

Average projected ARC and PLC spending peaks with the 2015 crop, and those payments are made in FY 2017.

Net CCC outlays between FY 2015 and FY 2024 total $79 billion.

Mandatory government outlays under the crop insurance program and certain conservation and disaster programs are not included in the CCC account.

Like ARC and PLC outlays, crop insurance spending can vary a lot from year to year.

Crop insurance net outlays total almost $85 billion between FY 2015 and FY 2024.

Livestock forage assistance totals an estimated $5.7 billion in FY 2014 and FY 2015.

USDA projects that livestock aid and the non-insured assistance program (NAP) will have annual outlays of over $700 million between FY 2016 and FY 2024.

Other disaster aid from FY 2008-FY 2013 was provided from non-CCC accounts.

CCC outlays total $79 billion over FY 2015-24

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12

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2008 2010 2012 2014 2016 2018 2020 2022 2024

Fiscal yearB

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Grains, oilseeds & cotton Conservation All other

10-year crop insurance outlays total $85 billion

0

5

10

15

20

25

30

2008 2010 2012 2014 2016 2018 2020 2022 2024

Fiscal year

Bill

ion

dolla

rs

Net CCC Crop insurance Non-CCC conservation Other non-CCC

Livestock aid totals almost $6 billion over FY 2014-15

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Net government outlays

Fiscal year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Feed grains (Million dollars)Corn 2,093 145 2,656 2,915 2,435 1,483 1,161 1,024 1,151 1,368 1,462Sorghum 181 3 90 263 234 215 189 183 186 209 207Barley 74 1 11 157 181 175 146 133 141 153 163Oats 3 0 0 6 8 7 6 5 5 5 6

Food grainsWheat 1,089 88 319 1,262 1,284 986 838 782 753 825 947Rice 350 1 267 269 266 274 259 254 246 255 261

OilseedsSoybeans 591 12 388 1,431 1,250 886 577 440 412 508 601Peanuts 46 9 328 380 416 434 394 401 423 450 452Other oilseeds 18 5 2 48 48 40 36 31 31 36 38

Other commoditiesUpland cotton 607 1,192 630 546 546 429 418 406 403 323 356Sugar, feedstock flexibility 1 0 35 8 6 8 6 7 7 9 10Dairy 6 190 104 54 97 128 136 123 99 133 124

CCC conservationConservation reserve 1,732 1,748 1,698 1,670 1,626 1,648 1,616 1,678 1,720 1,706 1,678Other CCC conservation 5 5 5 5 1 1 1 1 1 1 1

Tobacco trust fund 1,093 278 0 0 0 0 0 0 0 0 0

Other CCCDisaster payments, NAP 3,184 2,990 716 723 748 769 789 799 810 821 833Other net costs 1,129 996 595 653 666 629 485 463 463 464 466

Net CCC outlays 12,202 7,661 7,846 10,391 9,811 8,112 7,057 6,728 6,849 7,266 7,606

NRCS conservation 2,720 3,276 3,298 3,510 3,657 3,789 4,059 3,803 3,723 3,784 3,704

Crop insurance 8,311 6,971 8,121 7,694 8,064 8,487 8,794 8,996 9,063 9,176 9,220

Total mandatory outlays 23,233 17,908 19,265 21,595 21,533 20,388 19,909 19,527 19,635 20,226 20,531

Note: NRCS Conservation denotes mandatory spending on conservation programs authorized by the 2002, 2008 and 2014 farm bills that is notincluded in reported CCC outlays. Fiscal years begin on Oct.1 of the previous calendar year (FY 2015: Oct. 1, 2014 Sep. 30, 2015).All projections are averages across 500 outcomes.

Payments and crop insurance

With the new farm bill in place, PLC and ARC replace DCP and ACRE for grain and oilseed producers.

Projected ARC and PLC payments peak in 2015/16. After 2015/16, program rules force ARC revenue benchmarks to adjust downward for many crops and counties.

Payments generally move inversely with prices, explaining both the decline from 2015-2020 and the increase from 2020-2024.

Cotton and peanuts receive most of the projected marketing loan benefits.

Crop insurance indemnities spiked because of the 2012 drought.

The projections include the new STAX policy for cotton and SCO for program crops.

Projected average indemnity payments for losses top $10 billion per year.

The average annual loss ratio (total indemnities divided by total premiums) over the next 10 years is 0.93.

The crop insurance program has grown in importance relative to other farm programs.

Projected net indemnities (indemnities minus producer-paid premiums) exceed the projected value of crop payments under Title I (PLC, ARC and marketing loans) of the new farm bill after 2016/17.

Actual crop insurance indemnities will vary greatly from year to year, as will Title I benefits.

PLC and ARC replace DCP and ACRE

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DCP, ACRE PLC ARC Marketing loans

Net indemnities exceed Title I payments after 2016

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Title I crop payments Net indemnities


Indemnities exceed $10 billion most years

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Indemnities Premiums Producer-paid premiums


Selected direct government payments

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Million dollars)ARC payments 2,984 3,798 3,096 1,809 1,218 977 1,063 1,282 1,469 1,642 1,782PLC payments 931 2,742 2,829 2,484 2,202 2,072 2,042 2,257 2,375 2,573 2,880Marketing loans 509 667 644 653 546 509 505 534 472 531 505Cotton transition payments 531 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Total 4,955 7,207 6,568 4,947 3,966 3,559 3,610 4,073 4,316 4,746 5,166

Note: Includes selected payments for feed grains, food grains, oilseeds, and upland cotton.All projections are averages across 500 outcomes.

Crop insurance

Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Million dollars, crop year)Total premiums 10,036 9,813 9,949 10,454 10,986 11,443 11,660 11,799 11,870 11,939 11,785Producer paid premiums 3,844 3,716 3,719 3,908 4,109 4,280 4,361 4,413 4,439 4,465 4,406Premium subsidies 6,192 6,097 6,230 6,546 6,878 7,163 7,299 7,386 7,432 7,474 7,379Total indemnities 8,469 9,728 9,196 9,649 10,177 10,568 10,821 10,906 11,037 11,101 11,008

Loss ratio 0.84 0.99 0.92 0.92 0.93 0.92 0.93 0.92 0.93 0.93 0.93(Million dollars, crop year)

Net indemnities 4,625 6,012 5,478 5,740 6,068 6,288 6,460 6,492 6,598 6,636 6,602Corn 2,217 2,063 2,127 2,250 2,440 2,533 2,653 2,632 2,687 2,717 2,643Soybeans 337 1,296 1,161 1,242 1,332 1,428 1,457 1,491 1,514 1,504 1,511Wheat 1,194 993 615 655 692 717 733 738 731 718 731Upland cotton 440 422 477 487 486 494 502 509 527 534 542All other 436 1,237 1,098 1,106 1,118 1,116 1,116 1,122 1,138 1,162 1,175

(Million dollars, fiscal year)Net outlays 8,313 6,971 8,121 7,694 8,064 8,487 8,794 8,996 9,063 9,176 9,220

Farm receipts and expenses

Lower prices reduce cash receipts from sales of current and former program crops (grains, oilseeds, cotton and sugar) for the third straight year in 2015 and drop again in 2016.

Increasing production and slightly higher prices result in a small increase in program crop receipts from 2016 to 2021.

Receipts for other crops (including vegetables, fruits, nursery crops, hay and biomass crops) dipped slightly in 2014, but rise steadily in the future.

Livestock, dairy and poultry sector receipts peaked at $209 billion in 2014, a $90 billion increase from 2009.

Lower prices for poultry products, hogs and milk result in lower receipts in 2015.

Cattle prices decline in 2016, and total livestock sector receipts reach their lowest point in 2018.

Fuel, feed and fertilizer expenses are all projected to decline in 2015, resulting in the first year-over-year decline in total farm production expenses since 2009.

Fuel prices and expenses increase steadily from 2016-2024.

Feed costs increase between 2016 and 2020 in response to increased livestock production and higher prices for corn, soybean meal and other feeds.

Program crop receipts return to recession lows

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Program crops Other crops

Livestock receipts decline from 2014 record high

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Cattle Poultry & eggs Dairy Hogs & other


Fuel, feed and fertilizer expenses decline in 2015

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Farm cash receipts

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars)Feed grains 66.10 60.54 60.93 63.36 66.27 68.74 70.21 70.92 70.79 70.24 69.55Food grains 15.85 13.99 13.67 14.24 14.78 15.15 15.39 15.35 15.18 15.00 14.89Oilseeds 40.68 37.85 35.79 36.84 38.73 40.35 41.05 41.42 41.30 40.74 40.48Cotton 6.05 5.23 4.97 5.14 5.30 5.35 5.38 5.43 5.58 5.68 5.74Sugar 3.10 3.20 3.20 3.32 3.40 3.44 3.47 3.49 3.49 3.50 3.50Other crops 66.43 67.74 69.98 72.28 74.56 76.91 79.40 81.87 84.24 86.68 89.18

Cattle 81.53 81.79 78.54 73.57 69.95 68.25 68.32 69.23 70.25 70.85 71.36Hogs 25.31 22.46 20.88 20.33 20.71 21.50 22.40 23.19 23.63 23.74 23.92Dairy products 49.15 36.90 37.51 39.07 40.30 41.59 42.48 43.14 43.83 44.59 45.26Poultry, eggs 47.52 45.54 44.49 44.79 45.87 47.29 48.66 49.78 50.73 51.43 52.21Other livestock 5.68 5.48 5.48 5.50 5.56 5.66 5.78 5.91 6.03 6.13 6.24

Total cash receipts 407.39 380.72 375.45 378.44 385.44 394.24 402.54 409.75 415.06 418.59 422.33

Farm production expenses

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars)Feed 59.21 53.02 53.19 54.49 56.46 58.10 58.81 58.83 58.44 57.72 57.19Purchased livestock 32.84 34.18 32.66 30.10 27.94 26.65 26.38 26.75 27.22 27.61 27.94Seed 22.68 22.55 22.66 22.96 23.37 23.88 24.54 25.25 25.86 26.32 26.73Fertilizer and chemicals 43.28 41.43 41.20 41.38 42.05 43.17 44.55 45.32 45.41 45.51 45.52Fuels and electricity 23.43 19.70 20.79 22.28 23.75 25.08 26.68 28.09 28.95 29.91 30.89

Interest 17.63 19.30 20.70 22.05 22.91 23.55 24.17 24.71 25.19 25.70 26.19Contract and hired labor 34.86 35.56 36.63 37.80 39.00 40.22 41.44 42.71 44.02 45.37 46.79Capital consumption 33.29 33.91 34.17 34.38 34.60 34.88 35.23 35.64 36.08 36.57 37.08Rent to non operators 17.39 17.20 16.94 16.83 16.90 17.01 17.14 17.23 17.28 17.29 17.26All other 83.30 84.55 85.86 87.70 89.58 91.52 93.64 95.56 97.18 98.85 100.45

Total production expenses 367.93 361.40 364.79 369.97 376.56 384.07 392.57 400.09 405.63 410.85 416.05

Farm incomeCash income and expenses decline in 2015

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Gross cash income Cash expenses

Gross cash income (sales receipts and government payments) was steady at record levels between 2012 and 2014.

Lower prices for many farm commodities sharply reduce gross cash income in 2015.

The much smaller drop in 2015 cash production expenses causes net cash income declines from $115 billion in 2014 to $95 billion in 2015.

Net cash income averages about $90 billion per year for 2015-2024.

For the first time since 2005, livestock receipts exceeded crop receipts in 2014.

Projected crop and livestock receipts both decline in 2015, and livestock receipts do not hit their lowest point until 2018.

Government payments average about $10 billion per year between 2015 and 2024, accounting for about 2 percent of gross cash income.

After reaching record levels in nominal terms in 2013, net farm income fell sharply in 2014 and another large decline is expected in 2015.

After correcting for inflation, 2013 real net farm income was the highest since the 1970s.

Real net farm income in 2015 is only slightly above the recession low of 2009.

Nominal net farm income from 2016-24 averages about $72 billion per year.

Net farm income declines sharply in 2014 and 2015

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Nominal net farm income Real (2015 dollars)

Crop and livestock receipts both fall in 2015

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Farm income statistics

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars)1. Farm receipts 434.72 408.34 403.26 406.76 414.65 424.26 433.24 440.91 446.64 450.56 454.52

Crops 198.21 188.54 188.54 195.18 203.04 209.95 214.90 218.49 220.59 221.85 223.35Livestock 209.18 192.18 186.90 183.26 182.40 184.29 187.65 191.26 194.48 196.75 198.98Farm related 27.33 27.62 27.81 28.32 29.21 30.02 30.70 31.16 31.58 31.96 32.19

2. Government payments 10.76 9.77 11.76 11.22 9.65 8.84 8.63 8.57 8.95 9.31 9.63

3. Gross cash income 445.48 418.11 415.01 417.99 424.30 433.10 441.87 449.48 455.59 459.87 464.14(1 + 2)

4. Nonmoney income 24.04 24.13 23.67 22.76 22.00 21.72 21.97 22.51 23.16 23.92 24.74

5. Value of inventoryChange 6.38 1.57 2.95 1.20 0.03 0.87 0.69 1.10 0.60 0.42 0.17

6. Gross farm income 475.89 440.67 441.64 441.95 446.32 453.95 463.15 470.90 478.14 483.36 488.72(3 + 4 + 5)

7. Cash expenses 330.34 322.95 326.09 331.11 337.52 344.73 352.79 359.78 364.74 369.33 373.85

8. Total expenses 367.93 361.40 364.79 369.97 376.56 384.07 392.57 400.09 405.63 410.85 416.05

9. Net cash income 115.13 95.17 88.93 86.88 86.78 88.37 89.08 89.71 90.84 90.54 90.29(3 7)

10. Realized net farm inc 101.59 80.84 73.89 70.78 69.74 70.75 71.27 71.90 73.12 72.93 72.84(3 + 4 8)

11. Net farm income 107.96 79.27 76.84 71.98 69.76 69.88 70.58 70.81 72.51 72.51 72.67(6 8)Deflated (2015 $) 110.44 79.27 75.43 69.50 66.62 65.78 65.02 63.71 64.25 63.00 61.44

Corn prices depend on weather, energy prices, income growth and much more.

To examine alternative futures for agricultural markets, we considered 500 different combinations of assumptions about factors driving commodity prices.

Although corn prices average about $4 per bushel across the stochastic outcomes, there are some combinations of assumptions for any given year that lead to prices over $5 per bushel and some where prices drop below $3 per bushel.

PLC program costs are uncertain. If season-average market prices are above reference prices, no payments occur, but payments can be large if prices drop far below reference prices.

Given all the assumptions of this analysis, average PLC costs average less than $1 billion for the 2014/15 crop but increase to almost $3 billon in 2016/17.

In some of the stochastic outcomes program spending is near zero. In others, it is more than twice the average level.

Given assumed participation rates and the projected paths of average market prices and yields, average ARC payments increase from $3 billion for the 2014/15 crop to almost $4 billion in 2015/16, but then decline in subsequent years.

As with PLC, spending can be far above or below the average for any given year.

The provision that limits ARC payments to 10 percent of the benchmark revenue per acre puts an upper cap on program payments.

Ranges from the 500 alternative futures

PLC program costs are uncertain

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90th percentile Average of 500 outcomes 10th percentile


Corn prices depend on weather and much more

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ARC payments can also vary greatly

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Given the uncertainty over spending on the new PLC and ARC programs, net CCC outlays can be far greater or less than the projected average.

If prices are above reference prices and revenues are above average recent averages, the conservation reserve program and livestock disaster aid may be the only major CCC outlays.

In contrast, low prices or per-acre revenues could trigger payments that exceed the levels of recent years.

Volatility in commodity yields and prices creates uncertain outlays for the crop insurance program.

Higher crop prices, production and coverage levels increase crop insurance premiums and premium subsidies.

In any given year, outlays will depend on yields, prices and resulting indemnities.

In extreme weather years, indemnities and outlays can far exceed the average, as in FY 2013.

Net farm income depends on production levels and the prices of agricultural outputs and inputs, all of which are uncertain.

As a result, future levels of net farm income are also quite uncertain.

The sources of uncertainty considered in this analysis lead to a wide range of possible farm income levels for any given year.

There are certain to be risks not captured in these 500 alternative futures.

Ranges from the 500 alternative futures

Crop insurance net outlays are also uncertain

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CCC net outlays could vary greatly from averages

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Net farm income likely to stay below 2011-14 levels

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U.S. Baseline Briefing Book - FAPRI-MU · FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 1 Summary Lower prices have resulted in a large decline in crop producer

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